Which bank credit card gives you the most points per dollar?

When I cover credit cards that earn frequent flyer miles, most recently in May, I generally lump the bank-buys cards together. And while the differences between bank-buys and airline cards are fundamental, there are substantial differences among individual bank-buys cards, as well. As one reader asked, “Which bank credit card gives you more points/credits per dollar spent?”

The fast and direct answer is that the highest-paying card I could find that you can use for air tickets is Capital One’s No Hassle Premium Miles Rewards, which earns 1.25 miles per dollar charged to the card. Some other cards offer the same or even higher earnings, but only for limited kinds of charges.

Points per dollar, however, is not the complete answer to the broader “best card” question. Before you can decide which is absolutely the best card, you have to look at the reward side as well as the earning side, plus all the other credit card basics such as APR, annual fee, credit qualification, and such.

Clearly, I can’t begin to provide a single “one card fits all” answer. Instead, I’ll summarize the earning and reward features of some of the more popular cards. I’ll have to leave it to individual travelers to sort out the rest.

Bank-buys basics

As I’ve noted before, quite a few banks issue MasterCard and Visa cards that accumulate credit (miles or points) in an account with the issuing bank. When you get enough credit, you buy a ticket—or the bank buys one for you—on just about any airline, and without regard to individual airlines’ limitations on seats they allocate to frequent flyers. But the bank miles are completely separate from any airline miles you earn by flying—you can’t combine them.

A bank-buys card is generally better than a card that earns airline miles (1) when you earn most of your miles through the card rather than by flying and (2) if your primary interest is in “free” flights in economy class. On the other hand, bank-buys cards are virtually worthless if you like to use your miles for upgrades or seats in a premium cabin.

These days, most bank-buys cards offer a wide range of rewards other than travel, including merchandise and various services. My report here, however, is limited to travel rewards— a question that is complicated enough as it is.

Earning points

The most common formula for bank-buys cards is that you earn one point for each dollar you charge to the card. (Although a few banks once called their credits “miles,” many now refer to them as “points.”) The cards pretty much universally exclude some charges, such as financing fees, balance transfers, cash withdrawals, and such, but they award points for just about everything else.

A few cards offer premium earnings above the one point per dollar formula:

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• As noted, Capital One’s No Hassle Premium Miles Rewards card gives 1.25 miles per dollar. (A Capital One card limited to “professionals” earns two miles per dollar, but that isn’t available to everyone.)
• Citibank’s Citi PremierPass Elite-level card operates under a complicated formula: You earn the usual one “purchase” point per dollar, but you also earn one “flight” point for each mile you fly when you use the card to buy your ticket. For each purchase point you earn, you can transfer one flight point into your purchase account, in effect offering two points per dollar on lots of purchases. As far as I can tell, other Citi cards just earn the usual one point per dollar.
• Discover’s Miles card awards two cents per dollar for travel and restaurant purchases; one cent per dollar on all other charges.
• Orbitz sponsors a card issued by Juniper Bank that awards two points per dollar for travel purchases on the Orbitz website (with the usual one point per dollar on other purchases).

For the most part, cards that give more than one point per dollar are premium or limited-interest options. Compared with more common cards, they may entail some combination of a high annual fee, a high credit threshold for acceptance, or other limits.

In addition to ongoing earnings, many banks offer a bewildering variety of one-time “bonuses” for signing up or on your initial purchase. On the downside, many programs limit the number of points you can earn each year—although the limits are pretty high.

Reward formulas

The basic reward formula for most bank-buys cards is that each point is worth one cent toward the purchase of an air ticket—and, usually, to a bunch of other products and services as well. The air travel reward systems for most bank-buys programs fall into one of two patterns:

Straight one cent per dollar. Some cards give a value of one cent per point with virtually no other limits. Typically, you can buy the ticket through any agency you choose; when the charge appears on your statement, you can transfer points to offset the charge. That’s the way, for example, that Diners Club and many ordinary cards work.

• Capital One’s cards use a minor variant: Below a $600 ticket value, you transfer points in increments—tickets up to $150 require 15,000 points, and so on; beyond $600, the rate settles in at one cent per point.
• To use Citi’s ThankYou Points, you get roughly the same one cent per point, but you buy tickets through a special online site operated for the bank by Expedia.

Fixed-value programs

Many other cards offer various ticket classes at fixed point values.

• Typically, 25,000 points gets you a coach ticket anywhere in the 48 contiguous states, but most programs set a price limit for the ticket of either $400 (HSBC, Bank of America, US Bank) or $500 (Wells Fargo).
• Most fixed-value programs offer a wide range of ticket options, each with a dollar cap. Bank of America, for example, offers include a round-trip economy ticket to Europe at 50,000 points, with a ticket price cap of $700, plus lots of other options.
• Quite a few banks used to offer inexpensive tickets for fewer than 25,000 points, but the only remaining program like that I could find was with Juniper Bank.

For the most part, the “exchange rate” on these fixed-rate programs can be better than one cent per point, provided the ticket price is close to the cap for each point level. However, on the downside, you have to buy your ticket through the bank’s program, meaning you can’t shop the open market and you may therefore pay more than the best deals generally available.

Other features

I can’t begin to get into all the other similarities and differences in one short report. For the most part, you can use bank-buys credit for lots of other merchandise and services, although the point prices I’ve seen for merchandise tend to be worth less than one cent. However, some cards offer gift certificates that are worth one cent per point.

I plan to expand coverage of various credit card rewards. Meanwhile, to sort out all the factors, I suggest you check in with one or two of the online charge card comparison sites, including CardRatings.com and CardTrak.com.