Airline Credit Cards: Not For Everyone

My colleague Steve asked me the other day whether he should have an airline affinity credit card, the kind that earns miles every time you charge something to it. The answer, in his case, was yes.

But affinity cards are not for everyone.

Steve already had a  Gold Delta SkyMiles Credit Card from American Express, which is free for the first year. The card charges an $85 annual fee thereafter, and he was wondering whether he should renew it.

I told him that he probably should, as long as he would charge more than $250 a month to the card. Here’s why:

By charging $250 a month, he’ll earn 3,000 miles for the year. But he’ll have to pay the $85 annual fee for the privilege. And for about $85 he could buy 3,000 miles from Delta outright. (Yes, airlines sell miles.) Unless he’s going to charge more than $250 monthly, he would be better off using a credit card that doesn’t charge an annual fee and buying the miles.

But if he charges more than $250 a month, he can rack up some miles, especially if he eats and drives a lot. That’s because this particular Delta card pays double miles for purchases from supermarkets, gas stations, drug stores and home-improvement stores.

(See a very cogent comment by Mark Ashley on this post suggesting that my $250 a month threshold is way too low. My oversimplification of his argument: the miles aren’t really worth the $85 Delta would charge for them. It’s an excellent point. – jl 10/2)

I also suggested to Steve that he sign up for any special promotions he’s offered for the card. I’ve seen some where you can sign up online to get double miles for all your purchases during a certain period.

The same kind of calculation can be made for any airline card that awards miles into a frequent flier program. has a handy comparison chart of those cards and their fees.

Of course, no credit card is worth the miles unless you pay off the balance every month. You’ll never earn in miles what you’ll lose in interest if you have to pay credit card rates.

Had Steve determined that he wasn’t going to charge $250 a month, I would have suggested a rewards card, such as the Capital One No Hassle Miles Rewards Card, which charges no annual fee. Instead of earning miles on a particular airline, the card holder earns points that can be redeemed for a ticket on any airline. The number of points required depends on the price of the ticket.

You might wonder why I don’t recommend rewards cards over affinity cards in every case. But affinity cards have certain advantages that I’ll explain in a future blog entry on this topic.


4 thoughts on “Airline Credit Cards: Not For Everyone

  1. Mark Ashley

    On the one hand, I think you’re thinking about this the right way, by asking what value you need to obtain from the earned miles, in order to justify the annual fee from the credit card.
    But I think you’re off a smidge with your advice. Two comments:
    1) Your metric for the value of those earned miles is off. Way off. You’re using the price that Delta *charges* for miles, instead of the value that the passenger could obtain by *redeeming* miles.
    Buying miles from an airline is a horrible value proposition, and will always inflate your calculations.
    As a result, I think you need to be charging a LOT more to the card in order to justify the fee. 250 bucks a month isn’t enough.
    A longer discussion of the target value for frequent flyer miles is here:
    2) If you’re going to earn “miles,” make sure they’re airline miles, and not a credit card company’s proprietary miles. If it’s the latter, such as the Capital One card you suggest, you’re better off with a card that gives cold hard cash back. (In fact, I’ve argued that the Capital One card is a terrible value proposition.)
    A longer discussion here of mileage-earning credit cards:
    But good on you for raising the issue. Many people just renew their cards unthinkingly. It’s always worth your while to compare your options.
    — Mark Ashley

  2. Jeanne Leblanc

    Hi Mark,
    And thanks for writing. Those are great resources and you raise great points. I’m quite sure you know more about this than I do.
    I do think you’re getting ahead of my argument when you talk about the value of the miles when you redeem them. I was simply addressing the value proposition of the card itself – paying $85 a year for the card in order to earn 3,000 miles doesn’t make sense if you can buy 3,000 miles for $85.
    Whether those miles are worth $85 is debatable, as you suggest. I’d agree that the value is substantially lower than what Delta sells miles for.
    In this case, I was talking to someone who was choosing between the mileage card and no card. (He really prefers to pay cash.) But you’re right. I should also have compared the benefits of other cards, including cash rewards cards, to the mileage affinity cards.

  3. Cari

    Very timely post… I’ve been tossing up the renewal of my AA Mastercard and whether to get the CO World Mastercard (no first year fee waiver) but in the case of the latter, the initial 20K are harder to pass up.

  4. don

    I’ll respectfully question some of Mr. Ashley’s assertions.
    The value of miles is all about what you can exchange them for. Obviously, if you burn miles on low-fare routes, you’re getting very little value from them.
    So with Delta SkyMiles, for instance, you might spend 50,000 miles through the costly SkyChoice option for a coach ticket on a competitive route such as Bradley-to-Tampa … where over-the-counter tickets would be cheap. This would make your SkyMiles a very low-value commodity, and would support Mr. Ashley’s hypothesis.
    But what about if you spend much more wisely? The story is very different.
    Price Bradley to a major airline’s hub or other low-competition, high-fare market, & then see what you could do with judicious use of SkyMiles. Through Delta’s website, I priced out numerous Bradley-to-Salt Lake City flights available through SkySaver (only 25,000 SkyMiles round-trip) in June … Travelocity quoted me fares starting at $719 for the lowest over-the-counter, cash fares.
    In that scenario, the value of miles — and the value of a SkyMiles credit card — is vastly different.


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