Why Reward Credit Cards Might Be Costing You More Than Bonus Miles Are Worth

May 20, 2014 by  
Filed under Air, Guest Post, Money

This is a guest post by Ken Myers, a father, husband, and entrepreneur. He has combined his passion for helping families find in-home care with his experience to build businesses. You can learn more about him by visiting @KenneyMyers on Twitter.

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Rewards cards with bonus signup miles can earn you a free flight but are designed to prevent you from completely taking off. Knowing the pitfalls between your spending and a complimentary upgrade to business class will let you maximize miles while keeping your credit intact.

Be Interested In Rates

When you borrow money on even the best airline credit cards, interest rates often average 4.4% more than cards not offering points. This means you are spending more money with each swipe in order to points if you’re making full monthly payments. Over the span of a year, it is quite possible to spend more in interest alone than it would have been to simply save for a given trip.

data slap 1Being Beat By The Bonus

When you are approved for a rewards credit card, most will require you to spend a certain minimum amount – ranging from $250 to $3,000 – within 3-6 months to qualify earning a signup bonus. What many people don’t put into consideration is use of a card under these restrictions can devalue those rewards, in terms of the interest costs. As I mentioned above, it is incredibly easy to surpass the value of a plane ticket if you have to pay high interest on your purchases. That “free” flight you are planning on might cost you much more than it would by paying upfront, as you can see in this chart on Airfairewatchdog.

Mind Your Cents Per Mile

Many airlines, including the three alliance programs you should sign up for, allow you to purchase additional miles to pay for flights, hotels and fine dining. When you compare the cost of miles on various airlines, any perceived savings might be negated.

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For the sake of argument, assume that you’re going to travel from Denver, Colorado to Long Beach, California for a family visit. On Delta Airlines’ SkyMiles program, a round trip ticket would cost 50,000 miles plus $10 in fees and taxes. The Gold Delta SkyMiles rewards card you signed up with requires $1,000 be spent within the first 3 months in order to receive a 30,000 mileage bonus. Once acquired, the program rewards 30 miles for every dollar you spend. This means you need to spend an additional $667 in order to earn enough miles for this trip. You also need to consider the $95 maintenance fee for the card for every year after the first.

Now, assume your credit score puts you in the mid-range for this card – a 17.24% interest rate on purchases. After spending the $1,667 in order to achieve 50,000 miles, you could pay $475 in interest if your monthly minimum payments are $60 each – taking you three years to pay off. If you keep the card the entire three years, the total cash you would need to invest is $2,342:

  • $1000 initial spending in three months to get 30,000
  • $667 spending to earn 20,000 miles
  • $95 in maintenance fees per year for two of the three years it takes to pay off the card, or $190
  • $10 in fees and taxes
  • $475 total interest from your spending at 17.24-percent

The actual cash price of flying from Denver to Long Beach is only around $496. Using the rewards card for the specific purpose of earning miles, if you cannot pay off your total debt monthly, can increase your out of pocket expenses by roughly 450%. A total amount paid on interest being equivalent to four potential trips to California over that time.

Although it’s common advice to pay off any credit card debt completely at the end of each month, it’s easier said than done – as the average American household owes $15,191 – an amount 51% cannot pay back. Cards offering travel rewards are especially tempting but there are plenty of ways to earn frequent flyer miles without getting more credit cards, helping you avoid the hidden underbelly of traveler debt.

Thank you Ken for reminding us to save now and spend later – rather than spend now and pay forever. You can follow Ken on Twitter @KenneyMyers.

Why You Should Sign Up For These Three American Mileage Programs Even If You Don’t Live In The US Or Ever Fly US Carriers

May 13, 2014 by  
Filed under Advice, Air, Money

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One of the biggest mistakes you can make with frequent flyer miles, aside from not redeeming them at all, is using miles on an airline-to-airline basis. Make the most out of the points you earn flying by accumulating your frequent flyer miles in one place and thinking in terms of airline alliances. The best way to do this is by signing up for three specific US-based airline mileage programs – United Mileage Plus, American AAdvantage, and Delta SkyMiles – which will allow you to collect points from over 60 airlines as though they were a single carrier.

The Importance Of Funneling Your Miles

There are three major airline alliances: Star Alliance, oneworld, and SkyTeam, founded by United, American Airlines, and Delta, respectively. What most people don’t know is these three airlines – United, American, and Delta – accept miles flown on any of their partner carriers. The reverse is not true however, meaning partner airlines won’t accept miles from each other (in most cases).

For example, say you fly twice this year on Lufthansa and Turkish Airlines (both Star Alliance), 3,500 miles each. Most people would claim the first 3,500 miles with Lufthansa’s Miles and More program, then 3,500 with Turkish Airlines’ Miles and Smiles. That leaves you with 3,500 miles in two accounts that cannot be combined. Instead, if you were signed up for United’s Mileage Plus, both of those Star Alliance member flights would go into the same account – now you’ve got 7,000 miles. The best part: all partner airlines must accept points from United’s Mileage Plus. The same goes for American Airlines with oneworld members and Delta for SkyTeam carriers.

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You want to avoid spreading out your frequent flyer miles when possible, even if you regularly fly the same airline if it happens to be one of those listed below:

Star Alliance – Use United Mileage Plus When Flying Any Of These 25 Airlines

  • Adria Airways – Aegean Airlines – Air Canada – Air China – Air New Zealand – ANA – Asiana Airlines – Austrian – Avianca – Brussels Airlines – Copa Airlines – Croatia Airlines – EGYPTAIR – Ethiopian Airlines – EVA Air – LOT Polish Airlines – Lufthansa – Scandinavian Airlines – Shenzhen Airlines – Singapore Airlines – South African Airways – SWISS – TAP Portugal – THAI – Turkish Airlines

oneworld – Use American Airlines AAdvantage When Flying Any Of These 16 Airlines

  • airberlin – American Airlines – British Airways – Cathay Pacific – Finnair – Iberia – Japan Airlines – LAN – TAM – Malaysia Airlines – Qantas – Qatar Airways – Royal Jordanian – S7 Airlines – SriLankan Airlines – Mexicana

SkyTeam – Use Delta SkyMiles When Flying Any Of These 19 Airlines

  • Aeroflot – Aerolineas Argentinas – Aeromexico – Air Europa – Air France – Alitalia – China Airlines – China Eastern – China Southern – Czech Airlines – Garuda Indonesia – Kenya Airways – KLM – Korean Air – Middle East Airlines – Saudia – TAROM – Vietnam Airlines – Xiamen Airlines

You don’t ever have to fly United, American Airlines, or Delta to use their mileage programs as giant point collectors. All you have to do is follow to follow a simple process when checking in at your next flight.

dancing airportEvery Time You Fly Any Of The Airlines Listed Above Remember This When Checking In

Although the best flight search engines give you the option of adding a frequent flyer account number when booking, it’s much more reliable to work with the person at the check-in counter. When you hand over your flight details and identification, make sure to tell them you’re a member of (i.e. United Mileage Plus, American AAdvantage, Delta SkyMiles) and hand over the appropriate account number. Then, hold on to your boarding pass stubs for at least 4 weeks afterwards in case you notice the miles were never credited. This way you can call United, American, or Delta, with details (and proof) to make sure you get the points you’ve earned.

In Case You’ve Been Lazy You May Be Able To Redeem Past Flights

Once frequent flyer miles are credited to an account, they can’t be moved elsewhere under most circumstances. So if you’ve got your miles scattered across airlines, the best thing to do is begin concentrating them for the future, now that you know how. For the procrastinating travelers out there who might not have bothered collecting points for past flights, United lets you go back 18 months, American Airlines 12 months, and Delta 9 months. Browse through your inbox to find the specific flight details and with a single phone call you’ll be on your way to earning a free flight or upgrade in the most efficient way possible.

In case you’re still not completely convinced on using frequent flyer programs, here’s an 8 minute guide to getting set up for reluctant travelers and 7 ways to bump up your earning a notch with and without getting more credit cards.

How To Use A Virtual Private Network (VPN) To Score Cheaper Airfare

March 20, 2014 by  
Filed under Air, Money, Pictures and Video, Tech

Those of you reading through my daily email update will need to click through to the post to view the video.

Airfare for specific flights can vary based on where you are internationally and while we haven’t perfected Star Trek transporter technology just yet, simply appearing to be somewhere else digitally can unlock cheaper tickets you’d otherwise miss out on. There are a number of good reasons travelers should use a virtual private network (VPN) and aside from getting you around Internet censorship they can fool booking sites into thinking you’re in the United States, where airfare is often below international prices.

You can catch more of my videos on YouTube where I recently uploaded footage from the middle of riots in Donetsk, Ukraine and have posted me trying not to fall off a piece of luggage you can convert into a scooter.

8 Things You Probably Didn’t Know About Using Frequent Flyer Miles (Keeping You From Getting Free Flights)

January 16, 2014 by  
Filed under Advice, Air, Money

This post is brought to by Direct Travel Insurance UK who look forward to giving you peace of mind during your travels this winter. [What is this?]

airplane window

Airlines created frequent flyer programs to encourage repeat business from regular travelers. Frequent flyer programs are also set up with the hopes that casual travelers will stick with the same airline but confusing enough that few people will actually redeem miles for free flights. Unfortunately for most people this calculated confusion gives the impression that free flights using miles are only for business travelers or wizards descended from Maiar.

But if you regularly take two flights per year, chances are you’ll be (or already are) eligible for a free flight or upgrade within 24 months. Whether you’re already signed up for a program or waiting to do so, there are a few things you can do (that the airlines don’t advertise) to make your account much more effective.

1. The Best Airlines To Sign Up For In Order Are: United, American… And…… Delta

Even if you don’t fly with these specific airlines, sign up with their programs. They’re a part of Star Alliance, oneworld, and SkyTeam programs respectively, but the only airlines whose miles can be earned with partners. For example, I regularly fly Turkish Airlines from Istanbul, but use my United Mileage Plus number when booking. United honors miles earned by flying on partner airlines but it doesn’t work in reverse. Learn how to accumulate your miles in one place.

united mileage plus premier

These alliances cover over 45 major airlines but there aren’t any true budget carriers among them. Budget airlines with frequent flyer programs are generally US-based, such as AirTran, Southwest, and Frontier Airlines.

2. Redeem Flights For Peak Travel Times 330 Days In Advance

Seats reserved for award travel are set aside 330 days in advance of the flight date frequent flyer hacker Travis Sherry told us in a recent live chat. That means for busier seasons and around specific events like the World Cup, those seats go quickly as the airlines would rather have paying butts sitting in them. Even if you’re a traveler without a plan, booking 330 days out can guarantee you a free seat – plus may come at a discounted mileage rate.

singapore business class

3. Calling Is The Best Way To Book

The online booking systems provided by the major airlines are useful for getting a sense of what award seats may be available when, but aside from a glimpse into the 1998 Internet, that’s about all you should use it for. Calling the mileage programs directly almost always uncovers routes not shown online. Plus, if you’ve got elite status and some Art of War charm, it is often possible to talk your way out of fuel surcharges or other fees.

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Airline Contact Numbers

  • United Mileage Plus: 1-800-421-4655
  • American Airlines AAdvantage: 1-800-882-8880
  • Delta SkyMiles: 1-800-323-2323

4. Sometimes It’s Better To Pay For A Flight

There’s an intricate mesh of connections between airline contracts that can leave you paying hundreds of dollars for a fuel surcharge – making a free flight, well, not close to free. Surcharges are calculated a number of ways (Extra Pack Of Peanuts has a good price cruncher) but in short, if the fuel charges are near the price of an economy flight, you might want to keep just buy the tickets and earn miles. Alternatively, shifting the dates of your trip by a few days may also work.

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5. Layovers Under 24 Hours Don’t Count As Stops

Multi-city flights are a crafty way to see more places for less and if you’re up for a free stopover in one of your connecting cities, time it so the layover is just shy of 24 hours. Otherwise you’ll be charged miles for two legs of the route separately. Again, calling the airline and asking for the longest layover possible (I can’t imagine many people do) is how you can work in a stopover, double budget travel bonus! (If that stopover happens to be in Iceland, here’s how to make the most of it.)

Hallgrimskirkja Church Tower reykjavik iceland

6. You Can Earn Miles Without Flying

Those of you who are United States or Canadian residents have the advantage of bumping up your earning with credit card offers but it’s not a requirement. You can earn frequent flyer miles without getting credit cards and buying things you already would at the right online stores is just one of a few ways to do so.

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Additionally, calling the credit card company directly to ask for their best signup bonuses can often net you 40% or more miles. The biggest bonus offers are usually only mailed out to targeted (read: very frequent flyers) customers but researching those offers and politely asking for them is usually a good bet.

7. Miles Can Be Used To Book Flights For Others

Really struggling to find a good birthday gift? Well, your frequent flyer miles aren’t only for you to use, they can be redeemed for anyone you choose. A free flight to Mexico’s Yucatan is one of the few gifts that doubles for both best friends and annoying family members. Bon voyage!

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8. You Don’t Have To Spend Miles On Flights

All of the major airline alliance programs (reread #1) let you convert miles into gifts cards or points through their online stores… but not cash. Speaking of, it’s rarely a good idea to buy miles – one dollar buys you 25 miles on average – unless you’re looking for an inexpensive bump up to a given award level (e.g. purchasing 2,000 miles to get a free upgrade at 60,000).

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Remember, Miles Aren’t Any Good If They’re Expired

Most earned miles with frequent flyer programs expire after 12 or 18 months but you don’t have to spend them to prevent them from disappearing. You just need to use the account either by flying, spending a few bucks on through their online store, or using your program-affiliated credit card once per expiration term. Although the airlines are resisting free services like AwardWallet which make tracking your miles simple, features such as automatic expiration reminders are handy to have when available.

Lastly, it’s good to know that you can claim miles 12-18 months after you’ve flown, a process made much easier if you keep your ticket stubs for 4 weeks after any flight. Aside from being the required proof you actually did fly, those stubs can help you claim miles in instances where a given flight wasn’t credited to your account.

Frequent flyer programs aren’t inherently complicated to use, it’s the cloudy information surrounding them which makes it seem so. What are some of your best tips on using frequent flyer miles and some of the biggest mistakes you’ve made? Share with us in the comments so we can all start to see the friendly skies.

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