When considering a new credit card, incentives such as mileage points good towards airline tickets or hotel stays can seem truly beneficial and easily draw one in. This is especially true if it has been a while since you and your loved ones have taken a vacation. Although such cards may seem like the best way to enable the purchases you are already making to give you a well-deserved vacation, before signing up for a mileage reward card there are a few sneaky tricks utilized by many credit card companies that one should know of.
Some of the most important tricks to be aware of include:
- Deals that seem too good to be true: If the mileage points being offered seem miraculous for someone with your credit history that is probably the case. In addition to the advertised offer, many credit card companies also offer varying levels of points based upon applicants’ credit scores, but they don’t always make it known to applicants that they are not receiving the advertised offer. It will be up to you to carefully check the terms of your agreement, and if the deal is not as great as you thought it would be, leave it alone.
- Some of your most frequent purchases may not qualify for points: Some credit cards allow users to accumulate points for all purchases regardless of merchant, but some do not. It is important to know which method your prospective card company uses, because you may find yourself with a card you rarely earn points on.
- Hefty annual fees: These fees may be waived initially, but after the first year you may find yourself paying $60-$300 annually for your mileage rewards card.
- Minimum spending limits: Some cards require you to make minimum purchase amounts that must be met either monthly or within the first few months of having the card in order to continue receiving rewards. Not only will these purchases be subject to the mileage card’s relatively high interest rates, but you will be slammed with additional finance charges if these amounts are not paid off in time. Either way, you do not want to make unnecessary purchases to fulfill this requirement, especially if you cannot pay them off.
- Points are only redeemable at specific airlines and hotels: Some mileage rewards programs are partnered with specific airlines and hotels. This can be great if the airlines and hotels are located in the places you wish you visit, but if not, you may find yourself paying surcharges to choose different airlines or hotels that detract from the great deal you thought you were receiving.
- Foreign-currency fees: Many mileage cards anticipate that users will take the opportunity to travel to foreign nations and actively search for a way to benefit from their travels. Be aware of this if you specifically plan to use your miles for such purposes, and search for the cards without such fees.
- You are offered a wonderful sign-up bonus, but you are still a long way off from redeeming: Some card companies will offer large numbers of mileage points at sign-up, but will fail to tell you that quite a bit more are needed to actually be redeemed for an airline ticket or hotel stay. Be aware of this so you will not have to make two to three years of purchases (and annual fee payments) in order to redeem.
Hopefully this list has opened your eyes to some of the tricks associated with credit card mileage programs and will enable you to make an informed decision. On one final note, if you do decide that the benefits of a mileage rewards card outweigh the negatives for your present situation, be aware that opening and closing multiple accounts just for the miles can negatively impact even the best credit score.
McCartney, Scott Card Tricks Win Big Rewards for Some Traveler. Wall Street Journal, 20 Oct. 2011.
Web. 28 Jan. 2012 <http://online.wsj.com/article/SB10001424052970204618704576640931800937612.html>.
Perrin, Wendy The Informer: Card Tricks Every Traveler Should Know. Conde Nast Traveler, July 2011.
Web. 28 Jan. 2012 <http://www.cntraveler.com/travel-tips/saving-money/2011/07/The-Informer-Card-Tricks-Every-Traveler-Should-Know>.
Ryan, 5 Tricks Credit Card Companies Use to Diminish Rewards Value. Planting Dollar$, Mar. 2011. Web.
28 Jan. 2012 <http://www.plantingdollars.com/credit/5-tricks-credit-card-companies-use-to-diminish-rewards-value/>.
At The University of North Carolina Wendy plans to actively participate in a student group, Health Focus, which will enable her to use her knowledge and love for health and nutrition to educate youth in the Chapel Hill/Carrboro area. She also hopes to promote voter registration amongst her fellow students.
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