When browsing travel credit cards, you can go broad or you can go narrow. A general travel credit card is a great tool to earn points and redeem rewards across the landscape of airlines, hotels, and other travel merchants. A more niche option, however, is a specific type of travel card, such as an airline credit card. If you’re a loyal customer of a particular carrier, having its co-branded card in your pocket can give you a huge boost in value by providing you with perks for you already do: Fly with that airline. Read on to learn what makes up an airline credit card and get a better understanding of whether it’s the right credit card for you.
Airline Credit Cards at a Glance
An airline credit card is co-branded between a financial institution and a passenger airline. It has all the features of a traditional credit card, as well as bonuses that exclusively benefit customers of that airline. Most airline cards are designed to be used worldwide and will reward you with miles (the equivalent of points) for the purchases you make. These miles can then be redeemed for a variety of incentives, such as free flights.
Travel cards, in general, tend to require at least a good credit standing of applicants, and airline cards are no exception. Also in line with general travel cards, airline cards have above-average interest rates. You’ll commonly see APRs ranging from the upper teens to the mid- and upper- twenties.
Since airline cards bring plenty of perks with them, expect to see the majority of them charge an annual fee to counterbalance all the enticements. The amount of the fee depends on the card’s “tier”; the more accessible cards will typically have annual fees of around $50 to $95, while the most luxurious options will climb upwards of $400 in annual fees. Some airline cards do not carry an annual fee, but those will offer a basic set of benefits. The sting of these charges can be offset if you maximize all the resources extended to you, however. For instance, if an airline card imposes a $95 annual fee but also offers you a $100 statement credit, the latter essentially pays for the former.
Fortunately, there is one pesky fee you generally won’t have to worry about, and that’s a foreign transaction fee. With their cosmopolitan nature, airline cards are best used in as many places as possible around the world, thus it would work against their favor to charge the cardholder with a fee for shopping abroad.
What to Look for in an Airline Credit Card
Regardless of issuer or carrier, airline cards usually come with a similar set of features. Keep an eye out for these when shopping around for your next piece of plastic.
Signup Bonus: Part of the reason why airline cards, and travel credit cards overall, are so popular is that they draw customers in with the promise of a massive bonus reward. When they open an account and meet a certain spending threshold – typically between $2,000 and $4,000 – cardmembers will be given a jackpot of anywhere from 10,000 to 100,000 bonus miles, depending on the card. The higher the spending requirement, the higher the reward. Not only would such quantities take a while to accrue through conventional spending, but those sums alone could be worth one round trip flight to thousands of destinations.
While the prospect of several thousand miles in your account is extremely appealing, you should approach the challenge wisely. The best time to apply for an airline card with a signup bonus is when you know you’ll have some hefty spending to do, otherwise, you’ll be scrambling to make potentially unnecessary purchases just to hit that bonus goal. In addition, if you find yourself 50,000 miles richer but $3,000 in debt and no means to pay it all off, you’ll have dug yourself into a nasty hole. Thus, while the signup bonus can, and should, work for you, it can also work against you.
Rewards Program: The aforementioned signup bonus delivers miles as part of a frequent flyer rewards program in airline cards. The basic structure of these rewards programs allows you to earn miles for purchases made with the card. Most cards will earn you 1 mile per $1 spent, while shopping in certain categories will net you multiplied amounts, such as booking directly with the card’s airline or making purchases in dining or travel categories. As you can guess, the optimal strategy is to use your airline card early and often in the categories that will produce the highest quantity of miles.
Airline cards allow you to redeem accumulated miles in several ways. Naturally, top of the list would be discounted or free airfares. Even if you can only pay for part of your flight with your earned miles, you will still be saving money. You can also use your miles for seat upgrades to get more legroom or even move up to business or first class. Other ways to redeem include vacation planning, car rentals, hotel bookings, gift cards, and donations.
Complimentary Checked Luggage: If you do a lot of flying with your airline of choice, you’ll welcome this perk, which grants you – and, depending on the card, companions traveling on your reservation – your first bag checked free of charge. Higher-end cards will also waive the charge on your second checked bag.
Priority Boarding: Few things are more stressful than dealing with the coveted overhead bin spaces. Luckily, most airline cards feature priority boarding so you can board the plane before the masses and secure a spot for your carry-on.
In-Flight Discounts: Use your card to pay for food and beverages, headphones, and Wi-Fi connectivity; you will likely get a discount on such amenities.
Partner Airline Transferability: Almost all the major airlines belong to one of three alliances: SkyTeam, Oneworld, and Star Alliance. Although you may have a credit card that’s co-branded with just one carrier, chances are you can extend the reach of your rewards to partner airlines within the same alliance. This incentive adds plenty of flexibility to your card, as it lets you fly with other airlines (that may have more affordable fares) while taking advantage of the miles you’ve accrued.
Airport Lounge Access: The more prestigious airline credit cards offer either discounted access or full memberships to exclusive airport lounges where you can wait for your flight or get some work done and enjoy a range of complimentary amenities.
Companion Flight Certificates: Usually upon reaching your cardmember anniversary or when you’ve surpassed a spending threshold for the year, some airline cards will gift you with a companion certificate that allows another traveler to fly along with you practically for free. We say “practically” because you’ll still have to pay taxes and fees, but this amount should be a fraction of a full airfare’s cost.
Pros and Cons of an Airline Credit Card
An airline credit card will be one of your best friends if you’re a loyal customer of a single airline, fly with it more often than the average consumer, and regularly make use of the services that the carrier offers. Airline credit cards allow you to earn miles faster, as you earn not only from flying but also from the purchases you make with your card. They also give you rewards that are more fine-tuned to your lifestyle as a repeat customer of a given carrier, and some perks – like priority boarding – are not commonly found in other types of credit cards.
However, there are drawbacks. Unless you’re confident that you can pay off your balance in full each month, you’ll be feeling the heat of those higher-than-average interest rates. And if you don’t take advantage of all the benefits the card has to offer, then the almost certain annual fee will simply become an additional charge to burden you with. Further, you’ll need to be flexible when redeeming your miles for flights, as there are often blackout dates during which award flights are not applicable. If you’re the type that prefers the better deal, regardless of the company you’re traveling with, then a general-purpose travel credit card would make more sense to have.
All told, it comes down to your lifestyle and spending habits. An airline credit card can be a great tool if you can make it work for you, rather than the other way around. Always take time before you apply for a credit card to evaluate where you stand financially, whether it makes for your routine, and how you can make the most of the payment form that could soon be in your pocket.