Airline Cards or Bank Cards: Which Should You Carry?

Editor’s Note: In case you missed this popular article when we first published it in April, we’re re-running it in this week’s Mile Alert. We hope you find this travel advice useful.

As frequent flyer programs have gradually morphed into frequent buyer programs, miles earned for credit card charges have been elevated, in many cases, from a handy source of extra miles to the primary source of miles.

Over the course of the programs’ evolution, banks that issue airline- and hotel-affiliated credit cards have watched as high-income, free-spending consumers signed up by the millions for cards with a travel-rewards component. It was probably inevitable that those banks would begin issuing cards that featured one or more aspects of the airline cards but without links to specific airlines.

Today, all major banks offer credit cards with their own loyalty programs, independent of any single airline or hotel, giving consumers the opportunity to earn miles redeemable for free travel. In many cases, the banks now promote their own cards alongside cards linked to individual airlines or hotels.

Because the banks’ travel-rewards cards were designed along the same lines as the airline-specific cards, there is growing confusion about the differences between the two types of cards (and about which type might best suit a particular consumer). To highlight the differences and shed light on their strengths and weaknesses, I will profile two of the best-known cards: the American AAdvantage World MasterCard, an airline-affiliated card issued by Citibank; and the Go Miles Rewards Visa, a bank card issued by Capital One Bank.

Earning miles

The AAdvantage and Go Miles cards both award users one mile for every dollar charged. Where the two cards part company is in the number and type of opportunities to earn miles.

In addition to miles for charges, a member of the AAdvantage program can earn miles for flights on American and 20 other airlines; for stays at all major hotel chains; for rentals at most national car-rental companies; for home-equity loans; for restaurant meals; for phone and Internet service; and for purchases at 90-plus online retailers.

Members also have the opportunity to douple dip whenever a mileage-earning product or service is charged to the AAdvantage card. For instance, an American ticket charged to an AAdvantage card earns both one mile for every dollar of the ticket price and the number of miles flown, plus any applicable bonuses.

With a Go Miles Visa, cardholders earn miles for charges. Period. There are no other earning opportunities and no double dipping.

In addition, both cards offer signup bonuses and impose limits on mileage accumulation. New cardholders receive a 10,000-mile bonus the first time they use an AAdvantage card. There’s also a limit of 60,000 miles per calendar year, which is waived for elite members. Go Miles cardholders receive a 5,000-mile signup bonus, and their card caps out at 8,000 miles per billing period and 50,000 miles every 12 months.

In keeping with the prevailing standard among airline programs, AAdvantage miles do not expire as long as there is activity in a member’s account every three years. Miles earned with the Go Miles card expire after five years.

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Awards

Members of the AAdvantage program may redeem their miles for free flights and upgrades on American and 20 other partner airlines. As in other major airline programs, free domestic round-trip flights are priced at 25,000 miles for restricted awards. Longer flights and unrestricted seats cost more.

Restricted awards are truly restricted; there are a very limited number of seats available at the lower mileage levels, and no seats at all on the most popular flights. That limited availability has resulted in an ever-rising tide of consumer frustration.

Go Miles, like other bank cards, has attempted to capitalize on that dissatisfaction and claims its miles may be redeemed for travel on any airline. That’s because when a Go Miles cardholder redeems miles, a ticket is actually purchased on the cardholder’s behalf. Since that award ticket is a revenue ticket, it is not subject to the same capacity controls that make availability of airline program awards such a problem.

The Go Miles award chart is unique among both airline and other bank programs. To determine the miles required for an award ticket, multiply the price of the ticket by 80. If the ticket can be purchased for $100, it can be had for 8,000 miles; a $500 ticket would cost 40,000 miles.

This award formula is simple and eminently rational. And, it allows for mileage use beginning at much lower levels than would be possible in airline-sponsored programs. Another plus for the Go Miles program is that miles may be redeemed for non-travel awards, including merchandise, gift certificates, and a one-percent cash rebate.

Costs

Finally, looking at costs, the Go Miles card is cheaper to obtain and use, with no annual fee and a variable percentage rate of nearly 10 percent for outstanding balances. The AAdvantage card, on the other hand, has an annual fee of $50 and a variable APR of close to 16 percent.

And the winner is…

Each of the cards has its distinct advantages.

The AAdvantage program offers more earning options than any other program, whether airline- or bank-affiliated. But the AAdvantage card isn’t cheap, especially for consumers who don’t pay off their balances in full every month. And the uncertainty of award availability makes the redemption side of the program a crap shoot.

While the Go Miles card is a comparative bargain cost-wise, the earnings options will seem paltry to those who travel regularly and rely on flight and other travel-generated miles to reach award thresholds. On the other hand, the simplicity and availability of Go Miles awards will be a welcome change to anyone with first-hand experience of the airlines’ notorious capacity controls on award seats.

The bottom line is that there’s no single card that combines the best features of both worlds. And because AAdvantage miles and Go Miles miles cannot be combined, participating in both programs is a recipe for fragmented earnings and diminished awards.

So in the search for the best choice of travel-rewards card, there’s no one-size-fits-all answer. You’ll just have to try both types to determine which card will be the best fit for your travel and spending habits.