Airline and Travel Credit Cards
The typical airline or travel credit card allows you to earn one mile for every dollar you spend making purchases using the credit card. The miles you earn are good for discounted airline tickets, free travel or discounted car rentals and even hotel stays. You must accumulate a certain number of miles, say 10,000, before you can redeem them.
Some credit card issuers will give you double miles or a bonus on certain purchases. For example, you might earn X number of miles when you sign up for the credit card. You might earn double miles if you rent a car or buy airline tickets with the credit card. You might earn double miles if you fly on a certain airline.
Travel and airline credit cards usually come with added perks. The typical perk is free car rental insurance and lost luggage insurance every time you use the credit card to purchase airline tickets or rent a car. Some have exclusive arrangements with a specific airline or car rental company.
The following are hidden fees and costs associated with airline and travel credit cards:
(1) The annual fee -- Although most regular credit cards offer a zero annual fee, travel and airline cards almost always have an annual fee -- usually around $65.00 or more. The purpose of the fee is to defray the cost of giving away free miles and travel perks;
(2) High regular rates. A number of credit card companies are offering rates as low as 5% these days, but you will have a hard time finding such a low rate with a travel or airline credit card. Interest rates on travel credit cards are always higher than average to defray the cost of giving away all those free miles.
Airline and other credit cards that offer freebies and rewards are just a gimmick for the most part, offered as an incentive to get you to charge up a big balance on the card. You have to use the credit card quite a bit, rack up lots of interest charges, and pay a high annual fee to get a few free miles and perks. The best credit card in the world is one with no annual fee, a relatively low interest rate and no perks.