Before signing on the dotted line of an airline credit card application for a free flight, consider a generic travel-rewards credit card. Both offer the ability to redeem points for flights, but a generic travel-reward card also offers the option to claim a free travel ticket from any airline—as opposed to an airline credit card, which restricts travelers to the card’s issuing airline and its partners.
Examples of generic travel-reward credit cards include the Chase Travel Plus Platinum Visa Card, Capital One No Hassle Miles Card and the Discovery Miles Card.
Another advantage of the generic travel-reward credit card is that many do not charge an annual fee. According to a study by Mintel Comperemedia, only 23 percent of generic reward-card offers from January 2010 to March 2011 contained an annual fee compared to 99.5 percent of airline cards.
For example, the Delta American Express Card asks $95 a year as a fee while the Southwest card requires $69 in fees a year.
“The generic travel reward credit card is not as restrictive and is less likely to require an annual fee than an airline credit card,” says Bill Hardekopf, CEO of Lowcards.com, a free consumer resource website that follows the credit card industry.
While airline credit card issuers are more likely to charge an annual fee, their promotions tend to not engage in teaser strategies as much as general purpose travel-reward cards. About 52 percent of airline cards did not offer introductory pricing compared to 18 percent of travel reward cards, according to Mintel Comperemedia’s study.
Introductory pricing is when credit card companies offer a lowered APR for the first six months to attract new cardholders and then increase the interest rate later.
“Introductory or teaser pricing is standard with generic cards and may not be as likely on airline cards because those cards target a different audience,” says Lisa Hronek, research supervisor with Mintel Comperemedia, who monitors the direct-mail marketing campaigns of both travel-reward cards and airline credit cards. “We see the offer rates of general purpose travel-reward cards, but we don’t see what the final rates will be because issuers base their final APR decisions from information provided in the completed application.”
Another advantage of generic travel-reward cards is that the issuer requires fewer miles to get a free ticket, according to David Robertson, publisher of the Nilson Report, which tracks news about credit, debit and prepaid cards. The downside is that generic travel-reward credit cards may not offer flight perks, such as first-class upgrades and elite status eligibility in the way that airline credit cards can.
“Airline credit cards can give customers its own perks, which generic travel-reward credit cards don’t have access to. Continental One Pass gives its cardholders first bag checked free,” says Hardekopf. “Every so often there will be some attractive promotions that generic cards offer but not as often as airline credit cards.”
But what generic travel-reward credit cards lack in flight perks, they make up for in bonus points, according to Robertson. “With generic travel-reward credit cards you can get 2 or more points for one dollar, and issuers might run bonus-point incentives and specials throughout the year. Airline credit cards don’t run point specials,” he says.
Finally, airline credit cards may be more convenient than general purpose travel-reward cards when it comes to registering mileage credit after a flight.
“Airlines automatically post flight mileage on to your account. With generic travel-reward credit cards, the onus is on the cardholder to claim and monitor reward earning. General-purpose travel-reward cardholders have more responsibility to keep track,” says Hronek.
Whether you choose a generic or airline travel-reward card, certain rules apply to both for optimal use:
- Always take the time to study your options.
- Be particularly aware of the restrictions imposed by the credit card issuer.
- Pay attention to mileage expiration requirements.
- Inquire before booking about any surcharges and fees that may be tacked on when purchasing a reward flight.
Bon Voyage!
Juliette Fairley is a frequent commentator on Grab Networks’ Better TV. She previously hosted Cha Ching Money Makers TV show for the Discovery Channel and is the author of Cash in the City (John Wiley & Sons). Her work has appeared in The Wall Street Journal, The New York Times, TIME magazine and other publications. She is a regular contributor to WEALTH magazine. Follow her on Twitter @JulietteFairley and visit www.juliettefairley.com.
Tags: airline credit card, debt, generic travel reward credit card, travel reward card