That miles-earning card> that earned you a free flight to Bermuda on your honeymoon five years ago isn't going to offer you such valuable perks anymore. In fact, it is probably costing you more to earn less.
Airfare cards are great for the sign-up bonuses, but for most travelers, that s where it ends, says George Hobica, founder of fare-tracking site AirFareWatchdog.com.
At the same time that struggling card issuers have jacked up interest rates and made it more difficult to earn rewards, their partner airlines have introduced tiered redemptions and fees that make those miles less valuable. It s a double whammy for consumers, says Curtis Arnold, founder of card-comparison site CardRatings.com.
Nevertheless, card issuers are aggressively marketing miles cards, primarily because they tend to be incredibly profitable. In the first four months of 2009, 30% of mailed credit-card offers were for miles-based programs, compared with less than 20% last year, according to research by Mintel Comperemedia, a financial services research and consulting firm. And as Delta (DAL)
While it can't hurt to become a frequent flier in an airlines free miles program, consumers should probably send those miles-earning credit card offers through the shredder. Here are four reasons why:
Airline credit cards tend to carry an annual fee, which means frequent fliers must also be big spenders to come out ahead, says Avi Karnani, founder of financial management program Thrive. While these fees have been around for years, issuers may be less willing to waive them in the tight economy. The Continental (CAL)
Constantly-changing redemption values
Odds are good that your miles will be worth less by the time you re able to redeem them. Both credit-card issuers and airlines can make changes that affect the value of your miles -- and they are, says Arnold.
Earlier this year, Citibank (C)
Miles still aren t easy -- or cheap -- to redeem
Once you ve got enough, it s harder to spend the miles, says Hobica. Travelers almost always have to book 330 days out when airlines first release seats for any hope of snagging a reward seat at the cheapest redemption levels. But now some airlines also charge fees for booking reward travel on a partner airline ($25 on Alaska Airlines), for last-minute redemption ($75 to $100 on United (UAUA)
Tickets are cheaper through other means
Most airlines require at least 25,000 miles for a domestic, round-trip reward ticket, no matter whether you would have paid $200 or $2,000 for the same airfare on your own, says Karnani. Folks trading miles for domestic, economy-class tickets are less likely to come out ahead of road warriors booking international fares or business-class seats. Most travelers will be better served with a cash-back card, whose proceeds can be used for any ticket or any other purchase you want to make. (You ll also knock out the hassle of attempting to book a reward seat.)