Are Airline Credit Cards Worth the Hype?

This week’s post comes to us from Andrew, a writer at LendEDU,  a consumer education website and financial product marketplace. Many thanks to Andrew for sharing with us the pros and cons of airline credit cards!

Many frequent flyers consider getting an airline credit card, especially those who tend to use the same airline for their travels. Airline credit cards are basically a rewards card that provides cardholders an opportunity to earn miles or points on certain purchases.

Most airline-specific credit cards give extra points for expenses like airfare, rental cars, partner hotels, or in-flight purchases when you use their card. These travel credit cards make the most sense for individuals who travel often, usually travel with the same airline carrier, want to earn miles, and get their money’s worth on a vacation.

Credit cards offered by airlines give great rewards that are useful to most travelers, but these travel cards are not free from downsides. For example, something potential cardholders should consider is the impact a new credit card will have on their credit score. Before signing up for that flashy new airline credit card, you must consider the positive benefits along with the drawbacks. We will guide you through the pros and cons of airline credit cards.

What Are the Positives of Airline Credit Cards?

Airline credit cards that give rewards/points have several built-in perks.

First, purchasing airfare for a specific airline on a rewards credit card often earns you more miles than if you purchased the same flight with a different, non-airline credit card. Airlines offer more points when you book your flight on their airline and charging their credit card. Cardmembers also enjoy other money-saving advantages like free checked baggage, discounts on in-flight purchases, seat upgrades, and exclusive access to airport lounges. Some airline credit cards also offer extra miles earned on purchases with partners, such as rental cars or hotel stays.

With airline card rewards, you can start to see the potential for substantial savings. Some airline cards allow cardholders to redeem accumulated miles for award flights that cost little to nothing (When you book a flight with miles, you usually only have to pay taxes for the cost of your flight). Also, miles can be used for other cash-in opportunities, including statement credits or discounts on other airfare purchases. For new cardmembers, you may also qualify for a sign-up bonus of enough points to get you a  free flight. 

Getting an airline rewards credit card also has inherent benefits for a cardmember’s credit profile. If you qualify for an airline card, your credit score may ultimately increase if you are able to maintain a low utilization ratio and make on-time payments.

However, there are some negatives to consider as well.

What are the Negatives of Airline Credit Cards?

Having another credit card, regardless of the type, can also be harmful to your credit score. If you rack up too many purchases on an airline credit card and get close to or meet your credit limit, your credit score will take a hit. Similarly, missing payments on credit cards can drastically impact your credit score, and interest charges that accumulate with unpaid balances can add up significantly.

In addition to the credit hit, airline credit cards are often restrictive in terms of how points can be redeemed. Most airline cards require cardholders to cash in their points for airfare purchases, and there are limited options for alternatives like cash back or gift cards.

Also, it’s known that not many airline credit cards allow cardmembers to transfer earned miles to other airline frequent flyer programs. This means that if your airline preference changes, you may be stuck with points or miles that don’t suit your travel needs. For those who do not travel often or those who travel on other airlines consistently, a single airline credit card may not pay off. 

Finally, cardholders should recognize that most airline credit cards come with an annual fee. The most common charge for simply having the card is $95 per year, although it may be waived for the first year of card membership. Some airline credit cards may cost far more, depending on the extent of the rewards and benefits.

There is also the interest rate consideration, with most airline cards offering similar interest rate ranges as other credit card issuers. If you do not have strong credit, however, you are likely to pay more in interest or be declined the card altogether. 

Making the Call

Having an airline credit card can be beneficial for the right traveler. If you have loyalty to a certain airline that offers a rewards credit card, taking advantage of the rewards available, in addition to the discounts and free perks, may provide significant savings over time.

However, it is important to think through the downsides of airline credit cards as well. The annual fee, the restrictive points redemption options, and the minimal rewards on other purchases may make an airline credit card less valuable if you do not travel much. Consider your travel habits and the impact on your credit before opting for an airline credit card.

By Andrew from LendEDU – a consumer education website and financial product marketplace. He’s been writing about personal finance for several years now. Just recently, he made his own escape overseas to Ireland & Scotland in his first trip out of the country.