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Black Belt Shopper by Larry Wiener About a year ago I was asked to represent an organization in which I am active at a major event in DC. I would be meeting with Senators, columnists, and other important people in Washington. Was I interested? You bet! * * * The problem was that the only available flight I could find from LA to DC was $1100 on that short notice for the days I wanted to go. Fortunately, I had enough airline miles to go for a $75 fee which was charged because I didn’t give 21 days’ notice. Had I booked a few days earlier, the flight would have been completely free. I was on my way and I’m glad I went. What about airline mileage programs and the cards that go with them? Are they for real? Will they work for you? Let’s look. How
They Work Every plan is a little bit different, but here is how most of the plans work on the major airlines: You sign up for an account. You then get one mile (think point) for each mile you fly. For example, if you make a round trip of 1500 miles each way, you get 3000 miles. The airlines hope this reward will make you fly their airline when you have a choice. The airlines also offer you other ways to earn miles. The best known is their co-branded credit card which typically gives you a mile for each dollar purchased. These cards, however, have an annual fee (usually about $50) and relatively high interest rates. Airlines also offer other partners that help you build up your balance. These partners might include long distance companies, online stores, restaurants, Internet providers, car rentals, hotels, and the like. Typically, a domestic flight on a major carrier will cost 25,000 miles with foreign travel costing more. Is
This For You? That depends. If your job involves a lot of travel that you don’t pay for, this could be a gold mine. You rack up the miles on business trips the boss pays for and then enjoy free vacation travel. Likewise, if you pick up a lot of items for work and get reimbursed, these cards can be helpful in getting free miles. If you are planning to use the credit card to gain miles, however, look closely. Most people who open up an airline co-branded credit card never actually earn enough miles for a trip, providing profits for both the bank and the airline often at the customer’s expense. If you use the credit card fairly regularly only as a “cashbox”, this can work for you. If you would be tempted to make extra purchases because, after all, you’re getting miles, stay away from these cards. If having one of these cards would tempt you into a situation in which you would carry a balance, don’t even start. The interest rates are horrendous. Mileage programs can be great for people who are inclined to master the system and use it to their advantage. A couple of months ago, for example, I was on jury duty for a day. The night before I found an inexpensive restaurant near the courthouse that was a partner of the airline I use. I had a pleasant lunch and racked up a few extra miles. A local sandwich shop that is a favorite at my workplace also is a partner and I frequently pick up a few extra miles eating there. A long distance company offered me 1,000 for five months to be on their plan. The long distance was expensive, but since I do almost all my long distance on an inexpensive card plan, this offer amounted to free miles. In the past two years, I have taken two free trips that probably would have cost me close to $2000 combined for the grand sum of $225 combined in fees, including the annual fee for the credit card. I pay no interest because I pay off the card each month. To me, that’s a good deal. These programs work best if you can be relatively flexible with your travel (some airlines have blackout dates and a limited number of seats available for free travel) and, of course, if the airline goes someplace you actually want to or need to go to. They work best when you pay for inexpensive trips and use your miles for expensive trips. Are
There Other Alternatives? Yes. Some banks and even affinity groups (unions, service organizations, etc.) offer travel cards that let you fly on any airline. Some have relatively low mileage requirements to earn flights. Some, however, don’t offer meaningful travel advantages unless you carry a balance—something I don’t recommend. Also, these more generic travel cards don’t allow you to earn miles on paid flights or with the other partners such as restaurants or long distance companies. If you would like to earn rewards other than travel, you may want to look at other co-branded cards. TJX, the parent company of TJ Maxx, Marshall’s and several other discount stores, offers a rewards card with no annual fee. You get 5% for purchases made at their stores and 1% for other purchases. When your rebate reaches $10, you get a reward certificate good at any of their chains. There is no annual fee. Costco offers a co-branded no-fee American Express card with cash rewards. Two plans are available. One rewards you for carrying a balance, which I don’t recommend, while another is more designed for people who pay off their balances. Reward debit cards are also available. Citibank, for example, offers one that gives American Airlines mines. Reward debit cards are generally not as generous as credit cards, but these may work for you if credit cards are a problem. Should You Jump Into the World of Co-branded Cards These can be a boom or a bust for you depending on your own spending habits, financial skills, and resistance to the temptation to overextend yourself. Here are some guidelines you may want to consider:
For me, mileage programs and co-branded cards have worked extremely well. I have been able to enjoy a number of free trips and also free merchandise at some of the stores I frequent. But then I don’t carry a balance and I am able to work the system well enough to benefit from it. This is definitely an area in which you need to know yourself in order to survive.
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Copyright © 2004 by Larry Wiener, author of The Black Belt Shopper's Guide Want more money-saving tips? Get a FREE Subscription to our monthly newsletter! Read more Frugal Traveling & Automobile Tips Get Free Auto Insurance Quotes
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