What Is an Air Miles Credit Card and How Does It Work?

Air miles credit cards are a specialized type of rewards credit card designed for individuals who frequently travel or aspire to. These cards allow cardholders to earn “miles” or “points” through everyday spending. The primary purpose is to provide a pathway to discounted or free travel, primarily flights, by accumulating these rewards. Unlike general cash-back cards, the value from air miles credit cards is typically maximized when redeemed for travel-related expenses.

How Air Miles Credit Cards Operate

Air miles credit cards function by converting your spending into a form of travel currency. Instead of receiving a percentage of your purchases back as cash, you accumulate miles or points that can be used for travel. There are generally two main types of these cards: co-branded airline cards and general travel rewards cards. Co-branded cards are issued in partnership with a specific airline, meaning the miles earned are typically tied to that airline’s loyalty program and are best suited for those loyal to a particular carrier.

General travel rewards cards, on the other hand, offer more flexibility. Their points can often be transferred to various airline partners or redeemed through the card issuer’s own travel portal. This flexibility allows cardholders to choose from a wider array of airlines and travel options.

Earning and Redeeming Miles

Cardholders accumulate miles through various methods, with everyday spending being the primary way. For example, a card might offer one mile for every dollar spent on general purchases, while providing accelerated earnings, such as two to five miles per dollar, on specific categories like travel, dining, or gas. Initial sign-up bonuses are another significant way to earn a large sum of miles quickly, often requiring a certain spending threshold within the first few months of account opening. Some cards also offer referral bonuses if existing cardholders successfully refer new applicants.

Once miles are accumulated, the most common and valuable redemption option is for flights. This can involve booking directly through the card issuer’s travel portal, transferring miles to an airline’s frequent flyer program, or using them for upgrades. Many programs allow redemption for other travel-related expenses, such as hotel stays, car rentals, or even airport lounge access. The value of a mile can vary, but a good redemption often falls between 1 to 1.6 cents per mile, although this can fluctuate based on the airline and how the miles are used.

Key Aspects to Evaluate

When considering an air miles credit card, several financial aspects warrant close evaluation. Annual fees are common with these cards, ranging from no annual fee to several hundred dollars, and it is important to weigh these costs against the benefits received. Foreign transaction fees can apply to purchases made outside the United States or with foreign merchants, so a card without these fees can be beneficial for international travelers. The interest rate, or Annual Percentage Rate (APR), on purchases is another factor, especially if a balance is carried.

Understanding the card’s airline partners and the flexibility of transferring miles is also important. Some cards offer broad transfer options, maximizing redemption opportunities, while co-branded cards are limited to a specific airline or its alliance. Mile expiration policies can vary significantly; while some general credit card points may not expire as long as the account is open, miles transferred to airline loyalty programs often expire after 12 to 36 months of inactivity.

Blackout dates or limited availability for award travel can also impact redemption opportunities. Applying for a new credit card typically results in a “hard inquiry” on your credit report, which can cause a temporary, small dip in your credit score. Most air miles cards require a good to excellent credit score for approval.