Without a doubt, the biggest misconception about how wonderful credit cards can be is that you can get lots and lots of frequent flyer miles with them. Just use your credit card anywhere and everywhere you can and you’ll get to fly all over the world absolutely free. Nothing could be further from the truth.
Yes, there are many credit cards that give you frequent flyer miles with every purchase. But it takes a long time and a lot of money to get those “free” miles. Most cards give you a certain amount of miles just for signing up for their card. As many as 20,000. Then they give you another mile for every dollar you spend on the card. Sounds easy enough, but there are several catches to it.
For one, cards that offer miles also have an annual fee. In many cases, it’s a few hundred dollars a year. By the time you rack up enough miles to actually get a ticket, you could take the money you’re spending on your annual fee and just buy a ticket for much less. The biggest catch is how difficult they make it to use those miles. I fly almost every week and these days you can’t fly anywhere without hearing a sales pitch by the flight attendants trying to get people to sign up for that airline’s card. They’ll say, “you can get 20,000 miles just for signing up which is good for a roundtrip ticket anywhere in the United States, Mexico or The Caribbean.” Good luck finding a ticket to any of those places for only 20,000 points. In fact, you’d be lucky to fly to Mexico or The Caribbean for twice that number of points. And even if you do get a ticket to Mexico for 50,000 points using your miles, if you only got 20,000 points for signing up, then you had to spend $30,000 to get the rest of the points. $30,000 for a “free” ticket? Doesn’t sound very free to me.
A lot of people say, “well, if I use my card anyway, I might as well get miles when I do so.” The problem there is studies show that people spend an average of 38% more when using their credit cards than if they pay with cash. In a grocery store, they spend almost 50% more. There is also no such thing as an actual free plane ticket. Even if you use miles, they charge taxes and fees. In some cases they charge a processing fee AND a service charge. I never have figured that one out. There is, of course, another fee if you don’t book your ticket at least 21 days in advance. And good luck using miles for the exact dates and times you prefer without being charged even more miles.
As I mentioned in my last blog, no credit card company truly wants to help you. They just want your money. Credit cards wouldn’t make the huge profits that they do if they were paying for everybody’s vacation. Walk through any major airport hub and every few feet there is another person trying to get you to sign up for a credit card offering miles. Obviously they pay them based on how many people they get to enroll. Now do you really think it’s beneficial for the card companies to pay people to get customers if they aren’t making a fortune? Think about it. As always, if you want more information, visit me at johnfloyd.com.