Are Frequent Flier Miles and Credit Card Rewards Valuable?

by on June 27, 2013

You have likely seen TV and online ads from credit card companies touting their rewards programs. These ads highlight frequent flier miles, cash back on specific purchases and rewards for consumers who spend considerable amounts of money. A rewards card seems attractive on first blush as many people use their credit cards for big-ticket purchases that would yield big incentives. Credit card companies and banks rarely highlight the costs of these cards or the limitations of their rewards. You should tread lightly when dealing with rewards programs until you have learned some of the downfalls of these programs.

We should start by looking at the potential benefits of rewards cards for responsible spenders. You can continue to build your credit after introductory cards while earning rewards for your spending. A series of everyday purchases can turn from simple transactions to small deposits in a rewards account. These little drops in the rewards bucket can passively build toward a large reward in a short amount of time. You might be able to travel, buy special items and give gifts without doing much more than completing your daily tasks.

A big problem associated with credit card rewards programs is the incentive to spend far more than usual on a monthly basis. Your credit card company might offer a very attractive rewards program that offers points on gas, travel and grocery purchases. These purchases might be commonplace but you may be inclined to increase the amount spent per trip. For example, you might purchase snacks when making a stop at a gas station. These small increases to your typical trips contribute to higher debt and interest especially if debt is carried from month to month. You might also be inclined to make big purchases on a rewards card rather than using check or cash to take advantage of rewards programs.

You might not be aware of limitations on miles, points and rewards programs until you have applied for a credit card. Credit cards that offer frequent flier miles often have blackout dates that push your flights into travel periods that are often unpopular. Your rewards points might expire on a rolling basis, which can prevent redemption for bigger prizes. These programs are often tied to particular airlines and vendors that have limited options for reward redemption.

Credit card rewards programs are beneficial in particular for frequent travelers, small businesses and individuals who almost exclusively use their cards for big items. A frequent traveler will build up miles quickly on a reward card but redeem these points just as quickly without worrying about expiration dates. Small business owners rely on credit especially as their companies grow so they can reap rewards while completing daily tasks. A consumer who uses a rewards card only for large items is likely to pay off that debt within a few months and won’t build up interest in exchange for rewards.

{ 5 comments… read them below or add one }

Aayna from bamboo screening July 8, 2013 at 5:50 am

The reward programs are often used by the credit card companies to lure the individuals towards their credit cards. There are certain gains from such reward programs but in the long run such rewards just appear to be momentary. Thanks for the share.
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Vasiliki Karakatsanidis July 8, 2013 at 5:11 pm

Hello Aayna!
I agree that credit card companies use reward programs to lure people towards their credit
cards.But what are we doing?Are we using the credit cards blindly? If we do so then we are
responsible for our actions.
I personally don’t use credit cards, the whole idea scares me.I do my necessary daily shopping
in popular stores where most of the people go and I use proudly my cash back rewards cards.
Best of all I get 2% money back from every purchase I make!
Absolutely, when reward programs used properly, are not momentary! Thanks
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stanfordsarah July 8, 2013 at 4:28 pm

I only belong to rewards programs that link in with my frequent flier programs. Right now, I have 2 credit cards like this…the American Express Delta skymiles card and a Southwest Airlines Visa. I’ve found that both of the programs are pretty liberal with their restrictions and black out dates, which is nice. I went to Brazil last year with my Delta points that I had earned through the credit card and have another trip earned(low season). As for the Southwest card, I used the points that were given to me as a promotion for signing up to go to Boston from LAX. A couple of layovers, so not ideal, but still better than paying $500. I think as long as you keep an eye on the spending and the rewards you seek, then it can be a win-win for both.

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Fatima from backyard design ideas July 11, 2013 at 3:58 pm

Frequent miles and credit card spends always come in handy because you may need discounts on emergency travels and that’s when these schemes are a blessing. These are actually loyalty programs to encourage consumer spending but only few companies manage to maintain the quality standard. Thanks for the share.

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lee July 19, 2013 at 3:40 pm

I have been a big fan of the reward schemes over the years but after trying to get good deals out of many of them. i now think you are better off just getting the best deal for each item you are looking for and you will save more that way than going in to a scheme. lee
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