Editorial Policy

Is my airline rewards card worthless?

Eva Norlyk Smith Ph.D.

December 30, 2013

QHi Eva,

It seems like all I hear about is airlines making their reward points worth less and less. I've had a United card for quite a while now, but enough is enough. It's insulting to be a loyal customer. And travel is such a pain in the neck these days that I fly less and less. Is it even worth having an airline card anymore? And do you think there are better deals to be had in cash-back cards? I like earning at least something back on what I buy, so what kind of cards should I look into? — Louis

ADear Louis,

Indeed, getting the best value for airline reward miles is getting more complex.

The allure of co-branded airline credit cards lies in their ability to help you earn lots of extra points and then concentrate them all on the airline you fly most frequently. You get points when you shop (generally 1 point per dollar spent), extra points when buying tickets with the airline and points when you fly. Build up a big enough cache of miles, and you're jetting around the world for free and upgrading to first class.Ask Eva

At least, that's how it's supposed to work — but the major carriers have been ruffling the feathers of frequent fliers lately. Southwest recently announced it will devalue its points in March 2014, and your airline of choice, United, announced changes to its program that will make it more expensive to get upgrades. Plus, you may have noticed that the threshold for getting even the cheapest reward tickets has been getting ratcheted up to the point where it's hard to find a round trip for 25,000 miles — the old industry standard.

In addition, especially for overseas travel, the reward ticket itinerary options are often limited to convoluted routes with long layovers. And even seat upgrades, which used to be one reliable way of getting value from your rewards miles, now often come with an added fee.

If you fly a lot, there is still value in airline rewards cards, given the ability to accumulate points via shopping, tickets and flying — which sets these cards apart from their generic travel card brethren (which only earn you rewards on purchases). Plus, airline-affiliated credit cards come with extra perks, such as free checked bags, priority boarding, and, in some cases, expedited check-in. With baggage fees now at $50 per checked bag on round trips for many airlines, the value of those perks does add up.

Because you note that you don't fly that often anymore, an airline rewards card may no longer be your best bet. There are cash-back cards that could give you higher redemption value — and more flexibility. If you have excellent credit, you have your pick of several excellent cards. Here are a few of my favorites:

Blue Cash Everyday from American Express
With the Blue Cash Everyday card, you earn 3 percent cash back on supermarket purchases on up to $6,000 in purchases per year — that's $180 annually. You also earn 2 percent on gas purchases and select department stores, and 1 percent on everything else. There are a variety of ways to redeem your cash back, including simply requesting a statement credit that gets applied to your outstanding card balance.

If you don't mind the $75 annual fee, the AmEx Blue Cash Preferred card boosts your earnings to 6 percent cash back in supermarkets on up to $6,000 in annual purchases ($360 in savings per year), 3 percent on gas and department stores, and 1 percent on everything else.

Both cards come with additional sign-up perks: a $50 statement credit with the Everyday card if you charge $1,000 within the first three months and $100 for the Blue Cash Preferred).

If you like earning a bit extra on groceries and gas, another cash-back option is the BankAmericard Cash Rewards credit card, which gives you 2 percent cash back on groceries, 3 percent on gas and 1 percent on everything else.

Capital One Venture Card
If you'd like a card that gives you options for cash back and travel rewards, check out the Capital One Venture card. You earn 2 miles per dollar spent on all purchases, and new cardholders also get 20,000 bonus miles if they spend $2,000 on the card within the first 3 months. The annual fee is $59, but it's waived the first year.

Miles can be redeemed for any travel expense with any airline; you simply purchase your ticket and then use your miles earnings to “erase” the purchase and get a statement credit for the amount spent. Miles can also be redeemed for straight-up cash, but (and this is a big but) when redeemed this way you get less value than you would if you redeemed for travel expenses. Capital One points out in its terms and conditions that the redemption rate for rewards other than travel are variable and subject to change — so make sure you read the fine print to make sure you're getting the best value.

There are many other attractive cards out there offering a combination of cash back and travel rewards. While your earnings may accumulate more slowly than your frequent flier miles balance did, the flexibility these cards offer may be worth it if you're planning to stay on the ground from now on.

Got a question for Eva? Send her an email.