What are these credit cards getting us? Navigating the currencies that can and can’t get you closer to free flights.

currency

Many people entering this hobby ask what the “best” credit card to get is.  And I usually say that it can depend on a few factors.  I talk about these things in my post about the 4 things you must know before collecting credit cards.

Well…in addition to there being a variety of different credit cards you can choose from, there are also a variety of different currencies you can choose from.  Perhaps those of us who have had our heads in this game for a few years have forgotten how confusing that can be!

So here it is.  Today I am going to write a post about what currencies these credit cards can earn for us, and navigate which ones may be more helpful for getting us to free flights more quickly.  That last part is important.  These types of currencies probably all have their strengths, but I want to highlight which ones can help us get to free flights.

So I’ve divided the flight-relevant currencies into three categories.

1.) Bank points for reimbursement

2.) Frequent flyer miles

3.) Transferrable Bank Points

 

The first thing we need to embrace or roll our eyes at or at least acknowledge, is the fact that names do not help in this clarification process.  The names are all over the place.  Just as is true with “real money.”  You can have a Rupee but you don’t know what that Rupee is worth until you figure out if it’s from India, Mauritius, Nepal, or the Legend of Zelda.  Or you can have a dollar that’s worth the same and looks the same but is affectionately called a Balboa a few countries away in Panama.  Similarly, you can have a mile that pays towards a flight for an airline’s program, or you can have a mile that is actually not part of any airline’s rewards program but instead a bank’s.

So let’s throw names out the window and focus on what these things really purchase for us.

1.) Bank points for reimbursement

Not all bank points are created equally.  Before I can explain that however, let’s go over what a bank point even is.

Sometimes airlines partner with banks to make a credit card to cooperate with their rewards program, but sometimes a bank also creates their own “travel rewards cards” that earn towards their own rewards systems.  They do all kinds of things with these points, including reimbursing your expenses.

Example: CapitalOne’s VentureOne Rewards Credit Card (confusingly called a “mile”)

How it works:  Spend–>Earn–>Spend–>Reimburse

How close can this currency get you to a free flight?

Reimbursement programs tend to take a lot longer to get you to a free ticket than actual airline miles would.  If you look at the photo below you can see that 20,000 CapitalOne miles (the bonus you’d get after reaching the spend requirement of $2K in the first 3 months)  would cover $200 worth of flight.

Screen shot 2014-04-04 at 9.17.00 PM

With less United miles (17,500) we were able to fly my husband and I both to Puerto Rico via Aruba and Panama.  It’s hard to say what that flight would have cost in cash, but it would have been significantly more than $200.

What is this currency good for?
I’m not saying this kind of card is entirely a bad card. I think that this one in particular isn’t worth it, but there are some reimbursement cards out there that are worth having.  People like having them around to  cover baggage fees, car rentals, etc.  The random expenses that we can’t always use our frequent flyer miles for.  In fact…you can often use these kinds of points to reimburse pretty much anything, depending on the program.

But save the flight expense for a different strategy because these “miles’ will chip away at an airline ticket’s cost pretty slowly.

Frequent Flyer Miles

When an airline partners with a credit-card company to make a credit-card for their own rewards program, not the bank’s, then you will be earning frequent flyer miles on that card.  Nearly always these frequent flyer miles can be used for flights with any airline within the same alliance.  So if I have United miles, I can redeem them on a Lufthansa flight or an Air New Zealand flight, or pretty much anyone in the Star Alliance.  And if I have American Airline Miles or British Airways Avios, I can redeem them for flights on One World airlines.

Example: AAdvantage Card (which earns American Airline Miles)

How it works: Spend–>Earn–>Redeem

Sign up for an airline’s card and they will connect that card to your existing reward account or create one for you.

How close can this currency get you to a free flight?

This kind of card can get you a free flight more quickly than the reimbursement programs.  For instance with the AAdvantage Card mentioned above you can get up to 50,000 miles (after spending $3k in the first 3 months).  This is enough for a roundtrip ticket to Europe during off-peak or Japan during off-peak.

50,000 Capital One miles would cover $500 of that $1,286 flight to Japan.

What is this currency good for?
This currency is good for free flights.  In fact, in all our earnings frequent flyer miles are pretty much our end goal.

 

Transferrable Bank Points

Now, there are many cards out there that earn a bank’s own points towards their own rewards programs BUT also offer you the ability to transfer to miles.  (Above you may remember me saying that frequent flyer miles are our goal in our earnings.)  Basically the credit card companies have made deals or purchased frequent flyer miles or something and have decided to offer this transfer as one of many options for their bank points.

Example: Chase Sapphire Preferred (which earns Chase Ultimate Rewards)

How it works: Spend–>Earn–>Transfer–>Redeem

BEWARE!  In the case of Chase Ultimate Rewards, they also offer a reimbursement option.  Spend–>Earn–>Redeem via Chase’s travel portal.  In fact, Chase Ultimate Rewards can’t really be considered transferrable points until you have either the Chase Sapphire Preferred card or the Chase Ink Bold card, both of which offer this transfer ability as a perk of the card.

You can read more about how the Chase cards cooperate with one another by reading my “Getting to know Chase” post.

How close can this currency get you to a free flight?
In many cases these transferrable rewards are just as good as frequent flyer miles.  Chase offers a long list of transfer partners for whom there is a 1:1 transfer rate.  1,000 Chase Ultimate Reward points for instance will transfer into 1,000 United Miles.  Not all transfer partners will have a 1:1 ratio, but there are plenty of options that do.

What is this currency good for?
In some cases these points can be even more valuable than frequent flyer miles because you have the flexibility to transfer to either miles with a One World partner OR a Star Alliance partner.  So if you aren’t finding the ticket you want with one alliance, you can see if there’s a better option with the other alliance, then transfer accordingly.

Still, the goal is to turn those points into frequent flyer miles before you redeem them.

 

Conclusion: If you only read one paragraph in this whole article…

When you are considering applying for a credit card that advertises itself as a travel credit card, try to examine the offer to see what exactly they are giving you.  Are they reimbursing travel expenses?  That’s nice, but in my opinion, not a priority over the cards that will either transfer your points into miles with an airline’s frequent flyer program or an airline’s card that will give you miles with their own program.

And if you’re really just not sure how to figure out which cards give you what, check out Drew’s post on the top 8 travel cards we’ve been recommending.  That may be a valuable post for those trying to wrap their heads arounds what card offers what.

4 Comments on “What are these credit cards getting us? Navigating the currencies that can and can’t get you closer to free flights.

  1. I think the Arrival card is mandatory to apply for because it is the only card that will pay for rental cars and also the card needs to be used to pay close in award booking fees and taxes. Next I think one needs one or two cheap hotel cards such as Choice hotels credit card or IHG so that longer term stays can be booked at hotels for free. Then depending on one’s home airport, either keep churning the AA no annual fee cards or use Chase Ultimate Rewards to get points to pay for whatever airline you need to use based upon your own individual airport or to get Avios to get a connected flight to the international gateway needed for an award booking.

    • These are all great pieces of advice!

      As for hotels, I’m hoping to do a follow-up post that also dissects the different currencies in terms of hotels or rather, how this concept then applies to hotels. This post is mostly about the concept of these currencies in terms of free flights.

      While it’s not something Drew and I have been good at paying attention to previously, we’ve recently started considering the benefits of cards like the Arrival card. You make a great case for it with booking fees, rental cars, etc.

      Thanks for your ideas Mike!

  2. Agree on the usefulness of Barclay Arrival cards. They’re not as great for people like you and Drew who take a lot of international flights (even though I know you guys are much more frugal than a lot of the other bloggers out there). Besides what Mike said, another thing that I recently was writing about is about the Barclay Arrival card as compared to putting spend on something like a Southwest card.

    Why earn Southwest miles by spending with the Southwest CC ($1 spend = a point that is worth 1.67 soon to be 1.43 cents), when each $1 spend on the Arrival card is worth 2.2 cents (if you redeem for travel)

  3. Interesting point about comparing it with the Southwest cc. Thanks for adding your thoughts!

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