Don’t we all wish that such a thing existed. While there are many cards with 0% introductory APR, none offer that rate forever… There is nothing wrong with taking advantage of a good deal and signing up for a frequent flier card that offers 0% transfer and introductory rates, but make sure you read the fine print before putting your signature on paper. Weigh the pros and cons of each card – one might have a high annual rate, but perhaps the awards offered by that card is worth it?
Things to keep in mind when choosing a rewards credit card:
Interest Rate
Definitely look closely at the rates when choosing an awards credit card. They vary quite a bit, from Miles by Discover’s regular rate of 10.99% (0% intro APR for six months) to Orbitz Platinum Visa’s 22.90% (0% intro APR until October ‘09). These rates, however, are not written in stone – they differ between transfers, purchases, cash advance, and default APR, and may also vary monthly. Miles by Discover’s APR rates, for example are: 0% introductory, 10.99%-18.99% regular, 23.99% cash advance and up to 29.99% default.
Also, take a look at your credit rating before applying for a card – the better your credit, the lower your interest rate will be. The Miles by Discover 10.99% rate above, for example, is for holders with “Excellent Credit”, and the Orbitz 22.90% is for an “Average” rating.
Your best bet is obviously to keep paying off your balance on time. American Express Rewards Cards are specifically intended for those who do. There is no APR since you’re expected to pay in full every month, but if you don’t, you are charged $0-$35 or 2.99% of the balance, whichever is greater (these rates vary by state).
Fees
Look at all the fees associated with the card. Is there an annual fee? How about fees for cash advances, late payments, over limit charges, balance transfers and foreign currency transactions?
How Soon Will I Be Able To Get A Rewards Ticket?
Don’t expect to be able to book a free ticket immediately. Or even within a year (unless you put a ton of purchases on that card). You typically need 25,000 miles for a (roundtrip) ticket in the continental US, and 60,000 for a ticket from North America to Europe. But if you’re using a credit card anyway for your everyday purchases, it might as well be one that earns you miles or points. We use an airline card for all our household purchases, and have amassed a nice number of miles by now. We’re going on two trips “for free” (at least that’s what it feels like) this summer – one to Europe and one in the US. (To make the trip even more affordable, try to do a home and car exchange with a family at your vacation destination.)
How many miles do I earn per dollar?
1 mile/$ is the standard, but some cards are a bit more generous (examples are Capital One No Hassle with 1.25 miles/dollar spent, and Citi PremierPass and JetBlue’s American Express cards, which both give you 2 points/$1 for particular purchases), and many cards offer special introductory deals and incentives. An interesting take on this is HSBC’s Weekend Card, which gives you 2% cash back on all your weekend purchases (Saturday-Sunday) and 1% the rest of the week.
Do the miles expire?
Definitely make sure that the miles you acquire with your card do not come with an expiration date. While it’s a good idea to book award tickets soon after you collect enough miles (airlines go out of business, policies change), sometimes that’s not possible and you don’t want to lose your hard earned miles just because you’re unable to travel for a few years.
Cash Back Credit Card vs. Miles/Points Reward Cards?
Well, cash back gives you actual money in the hand after you’ve spent a certain amount, which can be used for anything – airline tickets included. However, when a check for $250 shows up in the mail, are you going to put that into a special “travel savings account”? I know I wouldn’t, I would end up spending it on groceries or car repair or something, so for me personally, getting miles is a better option. There are cards that give you a choice between cash or miles (Miles by Discover, HSBC Choice Travel for example) so if you prefer to be able to mix it up, that might be a better bet for you.
Which Award Card Is Best?
There is unfortunately no simple answer to that question. You have to do your research and weigh the pros and cons of each card. If you always travel on a particular airline, a card connected with them is probably a good idea. If you always travel on different airlines, a card that lets you redeem points on a whole bunch of airlines is your best bet, even if the interest and annual fee is higher. American Express is not as widely accepted in Europe as it is here, so if that’s where you’re usually headed, Visa or MasterCard would be better choices. But If you always travel in the US, American Express might work better for you. Their Starwood Preferred Guest card is a great choice for those who want to be able to redeem their points for either airline tickets or hotel rooms.
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