June 22, 2013

Why It is not Good to apply for a Milage Credit Card?

I did a thorough research on whether or not to apply for a milage credit card. Here is the final analysis:

Discover Miles: You get 2pts for the first $3000, then 1pt per $1 after that.  So to get to their cap of 10,000pts to be able to redeem your points you have to spend $3000 to get 6000pts and $4000 to accumulate the rest of the points to get to the limit of 10,000pts. To redeem the conversion rate  $0.01 applies and for your 10,000 points you get $100 worth of credit to pay for your airfare. For the same spending of $7000 the cash back at 1% is $70. ($30 difference annually, taking you don't have higher cash back rates, which is you have when buying airfares or other expensive stuff at 2% cash back you can easily cover for that)

US airways/ Lufthansa (Annual fee $90): The minimum miles to get is 25,000 miles. Your purchases will be rewarded at 2 pts per $ on their own tickets only and $1 for the rest. So to get to that point you need to spend $12,500 on flight tickets only from their careers (e.g. star alliance [delta, lufthansa]). Consider the $90 annual fee. Then at this point you can use ti for a free trip within US continental round trip (the value of which can be around $500). Conversely if you had made your purchace through cash back of 1% or 2% you' end up at $125-$250  +  $90 annual fee, the difference is at around $200 per year on the millage side!.

Some of them like Delta offer free first checked bag or US airways (I think) gives two companion tickets for $90, but for me as a single these are not much big deals, They might be for families.

 Who spends $12,500 per year on air trips?

For me that spend $1500 to go to my country round trip per year and maybe $500 for a trip within US, it takes me 5 years to buy so much worth of tickets from their website to qualify for US Airways or Lufthansa free trip offer. Conside the $90 that I have to spend annually (first year excemption) I have already spent 4*$90 = $360 just on fees! With even 1% cash back the cash back already pays off and you don't have to limit yourself only traveling with only one career.

Take away of the day: Stick to your Discover IT for their ShopDiscover 5% or 10% rewards and Costco American Express (3% on Gas, 2% flights) and you're good to go. Maybe one master card would be find too but not much of a difference.

One thing that I think was a bit misleading was the Barclaycard ArrivalTM World MasterCard.®, they say initial 40,000 pts  and double pts after that. but all they have is a cash back as you can not convert it to a free plane ticket. this will go to your checking account at 1% or 2% rate. Which is still not a big deal except for the initial pts they give.

Like Bank of America says: BankAmericard Travel Rewards® Credit Card:   Earn 10,000 bonus points when you spend $500 on purchases in the first 90 days of account opening, which can be $100 towards travel purchases ==> this means 1% Cash back!

No comments:

Post a Comment