How to choose a mile credit card

We have been avid collectors of miles for many years, flying over 75,000 miles a year in pursuit of great rewards (first class tickets, vacations in hard to book places) from miles. While we could spend hours going through the intricacies of programs and rules, much of what we learned that is different from conventional wisdom can be summarized in the following:

1. Hotel rewards are easier and oftern more valuable than air mile rewards

People often overlook the value of a good hotel program when earning points. Like flights, hotels aren’t cheap — a typical night can run you $150, $250, or even $400 or more — and become the most expensive part of your vacation.

However hotel rooms are much more abundant than airline seats in most cases. So, hotel rewards programs tend to be more generous and much easier to use for redeeming points. A free night at a hotel can be had for as few as 3,000 points, versus a minimum of 25,000 miles for a free airline ticket. And that hotel night can often be worth more than the airline ticket.

A night’s hotel in New York or Maui can often cost $350 or $400 — but with the right hotel program you can get that same room for 10,000 points. Compare that to the 25,000 miles to get the plane ticket that would cost you about $300 and you see the value.

Even more important — good hotel programs like Starwood Preferred Guest don’t put capacity controls on rooms that can be booked with points. If a standard room is available for sale, you can book it with points. Airline miles tend to be more restrictive at the base award levels.

If you don’t stay at hotels often, and primarily earn miles by using points, you’ll find the Starwood Preferred Guest program and credit card among the best. Click here to learn more about it. It’s the program for Sheraton, Westin, W, Four Points, and Le Meridien hotels.

2. Look for cards that let you transfer miles into multiple programs

Most people have a favorite airline or hotel program and think the program’s credit card is the only way to earn miles with spending. That’s very wrong. When earning points, one of the most important things to maximize their value is to have flexibility and options among airlines and hotels.

Several credit cards, including the Starwood Preferred Guest American Express, Chase Sapphire Preferred, and American Express Gold allow you to transfer your points directly into one of many airline mile and hotel point programs, with no dilution. You have to pick the right ones, which we’ve done, but this gives you great leverage when it comes time to book a vacation. You’re not prisoner to any one program, and can easily top off based on where your other miles sit.

The card with the most mileage transfer flexibility is the Starwood Preferred Guest American Express (We’re going to sound like a broken record about this card. It is well known among frequent flyers, but remarkably unknown among average credit card users). It offers over 20 airlines to directly transfer points into miles, including American, Delta, Alaska, British Airways, Hawaiian, and many more, while also letting you use its award winning hotel program.

The Chase Sapphire Preferred lets you transfer directly into Continental / United, one of our favorite and most flexible air miles programs, as well as British Airways, Hyatt, Marriott, Amtrak, Priority Club, and Korean Airlines. The American Express Gold and Platinum cards let you transfer directly to Delta, British Airways, Virgin Atlantic, Air Canada, and several more. The transfers for all the cards we’ve mentioned are easily accomplished online with no or minimal fees for the transfer.

3. Understand the benefits of alliances

In addition to cards that let you transfer miles into several airline programs, all of the major international airlines have partnerships with other airlines in the United States and abroad with which you can book reward travel. These are known as ‘partners’ or ‘alliances.’ There are three major alliances — Star Alliance, Sky Team, and One World. You can use miles from any airline within an alliance for redemption on any other airline within the alliance:

• Star Alliance – United, Continental, US Airways, Air Canada, Lufthansa, British Midland, Swiss, Austrian, Singapore, ANA Japan, Turkish, Air New Zealand, TAP Portugal, TAM Brazil, and more.
• Sky Team – Delta, Air France, KLM, Korean, Alitalia, Aeroflot, Aeromexico, and others.
• One World – American, British Airways, Cathay Pacific, Iberia, Finnair, Mexicana, Qantas, JAL

When planning your trip, always ask about partner and alliance rewards, as many times the agent will only try to quote you availability for your home airline. There is no supplemental fee for booking on a partner in an alliance versus a home airline.

4. Know the drawbacks of ‘any airline, anytime’ rewards

We call these rewards ‘cash for travel.’ They offer you the ability to use your points to book any ticket or hotel room anywhere. The catch is — the points required directly increase with the dollar value of the reward. Most work out to be 100 miles = $1 of travel value. So if a plane ticket costs $500, add two zeroes to that and it will required 50,000 points.

This works out to a 1% return on your points, which is less than the 1.5-3% or even 5% or more you can achieve if you use native airline or hotel points wisely in a traditional program. This is the price of convenience. Because you can book any flight you choose, you end up getting less in value for each point. However, two cards try to mitigate this somewhat — the Escape by Discover and Capital One Venture credit cards. They offer double points on every dollar purchased. So the value of your spending works out to be every $100 spent on the card is worth $2 in travel value.

That’s decent, but we prefer the ability to shoot for better values with a native air mile or hotel program — for example a $400 hotel room for just 10,000 points — which is $4 for every $100 spent. And that’s a real example — with the Starwood Preferred Guest card you can book that $400 hotel room in Maui or Manhattan for just 10,000 points.

5. Use our Mile Credit Card Value Calculator tool

It’s impossible to make a recommendation absolutely perfect for everyone’s situation. However our Mile Credit Card Value Calculator tool lets you input your monthly spending habits. It will take into account the point earning power of each mile credit card, the value of each point based on the type of reward you’re seeking, and the annual fee associated with the card. It will then tell you the value in dollars of the rewards you might earn each year via your spending.

You’ll find that hotel nights, first class upgrades, and international travel are among the most valuable uses of your points if you’re using the right card and program. Give the calculator a try. For the detail oriented, we generally value domestic airline tickets at 1.5 cents per mile, international tickets at 2 cents per mile, hotel rewards at 2.5 cents (in Starwood’s program — others vary as they are less geared to credit card spending), and first class upgrades at 3 cents per mile.