If you’ve flown in the last several years, you’ve likely been hit with an airline’s credit card sales pitch. Perks offered often include free miles or a signup bonus. Don’t worry, this isn’t a scam. These cards certainly have their advantages, but they’re not for everyone. Let’s look at how they work, and if you should sign up the next time you hear the pitch.
In essence, all credit cards typically serve the same purpose. They’re used to purchase goods and services, and you pay back what you owe on a set due date. The real difference between cards is the perks they provide. When it comes to airline credit cards, the perks are typically travel-related and include points towards tickets, hotels, luggage fees, and more.
For most airline credit cards, you earn around one point per dollar. Though all cards offer different perks, the points usually break down to about a penny per dollar spent. So if you spend $10k using your credit card for one year, then you could earn $100 towards a plane ticket or other perk as listed in your card agreement. Some cards offer higher returns and others lower, and some may offer additional points when you buy goods and services in particular categories, like dining or travel.
You have the choice of going with a generic air mile or one associated with a particular airline. One of the tenets of personal finance is to choose the accounts that work best for you. If you travel on one airline the most, you might choose its card. At the same time, if you go for an airline-specific card, there will be limits on how you can use your points. So, you need to ask yourself how much you enjoy flying with this airline. If you decide it’s worth it, you may see additional perks such as free checked bags and priority boarding.
Since the primary benefit of spending money on an airline credit card is acquiring miles, these cards are best for people who fly often. If you only take a trip once or twice a year, the reward won’t be worth the effort. However, if you travel frequently, the perks of these cards can be incredible.
Checking a bag can cost upwards of $50, and with many card memberships, this fee is waived. As a cardmember, you also have a better chance of getting a seat upgrade if room allows. Some flights will also give members a discount on in-flight purchases like snacks and Wi-Fi access. Another benefit that many frequent fliers enjoy is access to airport lounges. If you haven’t been, these are private areas offering food, drink, entertainment, internet, and even shower facilities.
All of this is in addition to the underlying benefit of improving your credit score by using and paying off a credit card.
As with any card, you’ll have to apply and be accepted based on your credit history. There are many reasons why your application might be rejected, from having too much existing debt to having a shallow credit history. Just because you apply for a card doesn’t mean you’re guaranteed to get one.
If you’re approved for a card but fail to take the responsibility of credit seriously, you could find yourself in serious debt. Collectively, millennials owe around $1 trillion in debt, and credit card debt is one of their top concerns. If you’re not good at managing your bills, a credit card could put you in serious jeopardy.
Many credit cards come with an annual fee. If you don’t have the money to cover this expense, an airline card may not be right for you.
With all this in mind, there are certainly great perks associated with getting an airline credit card. Take some time to consider your travel habits, the pros and cons of credit, and make the best decision for you.