Credit cards promising airline rewards may seem appealing, thanks to their assurance of double miles and huge bonuses; however, any wise customer will opt to read the fine print once more. Most often than not, you can get better returns on your credit card if you opt for cards with cash back facility rather than airline reward cards.
Annual fees on airline cards fly through the roof
The recession that hit the world a couple of years ago had an adverse impact on the credit card industry as well as the airline industry. This enforced drastic cost cutting measures across both these sectors. The banks managed to stay afloat by increasing the annual fees on their reward cards. And cards that were associated with airlines saw some of the steepest hikes ever in the fees levied on them. A classic example of this is the Delta Skymiles Gold Card from American Express. Customers who opt for this card do not have to pay their membership fees for the first year. However, from the consecutive year onwards, the fee on these cards jumps up to $95 which is a clear 10% increase from the years before that.
In comparison, credit cards that come with assurances of cash back facility do not carry the burden of heavy annual fees. The rebates that are issued to the customers by credit card companies are funded by the charges that are levied on merchants who accept credit cards. Hence, the bank does not feel the brunt. In fact, they are more than willing to share a part of the money spent as cash back since it encourages consumers to spend more on their card for their purchases. They not only keep their customers happy but also make money in the process.
Airlines backtracking credit card deals in favor of cash
The frequent flyer program has now been overshadowed, thanks to the cut throat competition in the aviation industry. In addition to reducing the "reward" seats on their flights, many airlines are also levying redemption fees on consumers. In most cases, airlines have denied seats to "reward" passengers in order to accommodate other customers who pay complete cash for their seats.
Most of the frequent flyers programs offer a seat under this category when you have accumulated 25,000 miles on your credit card. However, in order to reach that mark, consumers will have to spend up to $25000 on their credit cards.
Keep in mind your daily expenses when deciding on which type of credit card to opt for. Making time to give this a thought can help prevent future shocks!