Why Your Airline Credit Card Is Worth Keeping—But Rarely Useful For Spending

I receive compensation for content and many links on this blog. Be aware that websites may earn compensation when a customer clicks on a link, when an application is approved, or when an account is opened. Citibank is an advertising partner of this site, as is American Express, Chase, Capital One, and others. Any opinions expressed in this post are my own, and have not been reviewed, approved, or endorsed by my advertising partners. I do not write about all offers that are available -- instead focusing on miles, points, and cash back (and currencies that can be converted into the same). Terms apply to the offers and benefits listed on this page.An airline credit card can save you enough in checked bag fees to justify keeping it, but cost you hundreds of dollars in rewards if you use it for your spending. In this week’s episode of Airlines Confidential, Ed Pizzarello favored flexible bank points while former American AAdvantage President Maya Leibman preferred the simplicity of airline and hotel cards. Later, she recalled something an unnamed former loyalty program president had told her: “people will pay anything for a free flight.” A Card Can Be Worth Having Without Being Worth Spending On For at least the last decade and a half I’ve been arguing that getting an airline card for benefits doesn’t mean it should become your default payment method, and that there are different distinct reasons to get a card besides payment processing (and bundled financing): An initial bonus. Spending enough to earn a large bonus can make sense even when the card’s normal earning rate isn’t attractive. And the bonus can be a reason to apply for the card, but you still need to decide if it’s worth using for ongoing spend. Benefits that come with keeping it. Checked bags, boarding benefits, lounge access or an anniversary certificate can justify the annual fee. The card may belong in the sock drawer, not your wallet, if actual rewards for spend aren’t great enough. Rewards for actual spending. This is where the return on the next dollar matters, including any status credit or spending threshold you’re working towards. Some benefits require paying with the card. Make the purchases needed to use those benefits. That still doesn’t make the card the best choice for the rest of your spending. Holding a UnitedSM Explorer Card (See rates and fees) is great if you fly United because you earn more miles, and then you spend fewer miles on your redemptions. That doesn’t require spending on the card itself. What Your Free Flight Actually Costs Put $30,000 of spending on a card earning one airline mile per dollar, and you earn 30,000 miles. Put the same spending on a 2% cash back card and you earn $600. You wouldn’t pay 2 cents per mile to buy miles, but that’s what you’re doing at 1 mile per dollar of spend, leaving aside other benefits from that spending (such as credit towards airline status). If you use those 30,000 miles for a flight you could have bought for $300. You’ve given up $600 to avoid paying $300. That’s just dumb. If the same miles buy a trip you’d actually pay $900 for (not just one that’s priced at $900 but where you’re unlikely to spend that), it’s anothe matter. That’s why airline miles make more sense for premium cabin international awards than domestic coach ones – because there’s generally more leverage when redeeming the points. And if the spending also earns credit towards status or another useful benefit, it can make sense also. Scott McCartney compared cash back with the value of individual hotel points and airline miles. But you have to multiply the value of each point by how many you earn. A half-cent point earned twice per dollar is a 1% return. The same point earned six times per dollar is 3%. You Can Earn Airline Miles Without An Airline Card Leibman’s preference for simplicity is fine as far as it goes, but bank points don’t require abandoning airline awards. You can keep points flexible – such as on a Chase Sapphire Reserve® (See rates and fees) or a Bilt Palladium Card (See rates and fees) – and transfer them when you find the award you want. Even American, which was long unusually difficult to access through transferable bank points, is now a Citi transfer partner. The same bank sells you American’s credit card and a competing currency that can become American miles or points in other programs. Spend on a Citi Strata EliteSM Card (See rates and fees) or a Citi Strata Premier® Card (See rates and fees.) and transfer to AAdvantage. That flexibility lets you choose where to redeem instead of committing all your earnings before you know which program has the best deal. American’s cards earn Loyalty Points towards status and it’s uncapped. And, as I recently explained about the Citi® / AAdvantage BusinessTM World Elite Mastercard®, eligible employee-card spending can earn status credit for both the employee and the primary cardmember at the same time. That’s a reason I’d consider moving spending: earning status for my wife as well as myself. Topics on this page Editorial note: any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Comments made in response to this post are not provided or commissioned nor have they been reviewed, approved, or otherwise endorsed by any bank. It is not the responsibility of advertisers Citibank, Chase, American Express, Barclays, Capital One or any other advertiser to ensure that questions are answered, either. Terms and limitations apply to all offers.