Are mileage/rewards credit cards worth it?

By Josh Smith

Walk through an airport or open your mailbox and the odds are good that you’ll be confronted by at least one offer for airline miles or other credit card rewards.

Rewards credit cards give you miles or other incentives to use them for your purchases, but typically carry an annual fee. For the first year the annual fee is waived, and typically you can get bonus miles when you sign up, allowing you to earn a flight fairly quickly.

The presence of an annual fee is one reason why you might question the overall value of a mileage rewards card, but if you know how to play the game and are willing to invest the time, you can make out like a bandit.

Are Rewards Credit Cards Worth it?

If you don’t intend to pay off your balance every month, then stop right now – you will lose out in the long run. Rewards cards typically have higher interest rates, which will quickly eat into your saving and are compounded by annual fees.

If you can pay off your card every month, ask yourself if you will be able to use the miles. Look at reviews for the cards that interest you online to see if promises of no blackout dates are true.

There are plenty of people with extra miles on their credit card that go unused because they underestimated their ability to travel.

REWARD CREDIT CARD STRATEGIES

Casual Users and Travelers

If you are a casual user, your best bet for using a rewards card without getting taken for a ride is to stick to a single card.

The Capital One Venture card is a top pick from Money Magazine, and has a lower $59 annual fee, or look into an airline specific card if you can commit to flying with one airline.

By keeping things simple, you can reap the sign on bonuses, and keep track of your renewal dates and fees easier. It also allows you to commit to one card for racking up the miles.

All in Users and Travel Hackers

If you are here to maximize the miles, you can sign up for as many credit cards as will accept you and become a travel hacker. If you are committed to keeping track of bonus points and using the rewards enough that it covers the annual fees you can pull off amazing travel for next to nothing.

For example, Steve Kamb spent $418 to fly 35,000 miles and live it up like James Bond! This is extreme, but just like extreme couponing is a hobby, so is travel hacking.

Extras to consider

Mileage rewards cards aren’t only for miles; there are a number of other benefits given to users, especially for airline specific mile cards. If you travel a few times a year, you may be able to cover the cost of the annual fee with some of the following benefits.

• 1 Free checked bag
• Complimentary passes to Airline Clubs and Lounges
• Companion tickets 
• Priority boarding

In the case of free checked bags and day passes, you might be able to cover your annual fee if you fly twice a year.