Monday, November 7, 2011

My 2 cent for credit cards...

Before I start, please read the following first:

How hard is it for middle Americans to charge $10,000 in a year? 

Based on the Man (I assume he is the husband of  Mommy Point), it does not seem it is difficult to charge $10K in a year, right?

No offense - in my opinion, he is wrong.


1. I hate Southwest (See There are reasons why I hate (not even dislike) Southwest... )

2. It is simple - each card is designed for different situations. There are cards designed for groceries, gas, restaurant, and even travel (like airlines, hotels cards).

A lot of FlyerTalkers in fact know and in their wallets some of the programs are way much better than an airlines' loyalty programs, such as Citi's Thank You (A reward program that allow you to use points to book travel - and at the same time - you earn airlines reward as well).

3. The reality is - credit cards are not always welcome.

And the most important is - the value of the reward you earn from credit card.

I will use Chase United or Continental Card as the example (they are pretty the same now).

What can you do with 10K miles you have earned after spending $10K (in this situation, I assume no bonus has been involved)? A one-way ticket, subjected to inventory control, from San Francisco to Los Angeles, plus tax.

How about if you want to go to New York round-trip instead? Let's assume the ticket costs $500 (tax included). And there will be 2 checked luggage with lounge access both directions.

For Chase United card, you will need 2.5 years in order to get enough miles.

Then the annual fee kicks in.

So it costs $237.5 (I assume that Chase would refund the unused portion of annual fee, which in reality it is not the case) to earn 25K for a round-trip ticket from San Francisco to New York. Then the tax (About $22), luggage ($35 X 2, the card waives the first luggage), and lounge access (free passes from the card, otherwise, $39 online purchase per visit).

Then the actual cost will be $329.50.

How about Citi's Thank You? You will still get 25K points in this case (again, no bonus whatsoever...) The points will be only able to cover half of the trip ($250).

In this case, the actual cost will be $448.


1. With the airline miles, you are subject to inventory control.

2. San Francisco to New York is not always $500. The lowest I see is less than $300.

With the assumption that in both ways, you get the same flight, but this time, the price dropped to $300.

With this, the actual cost associated with redeeming the miles will be still $329.50. However, the actual cost of using Citi's Thank You points will be dropped to $248.

And please read this before continue:

Confessions of a Once and Future Credit Card Churner

Gary (not to be confused with me) addressed an important issue - why you have to earn the reward in a hard way by earning everything dime by dime?

This I agree. The way I see it - the value of airline credit cards is its opening bonus, but nothing else.

My suggestion - plan your own way of using credit cards.

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