Frequent flier miles are nice, but high interest rates and fees are not

A lot has changed in the last twenty years or so since American Airlines introduced the first frequent flier program. As originally designed, passengers who frequently purchased tickets on the airline of their choice earned the ability to fly free later. The whole point of the program was to see to it that passengers used one airline and one airline only, and that they paid cash for the privilege. Things have changed a bit, and now consumers find that they can earn frequent flier miles in ways other than by purchasing plane tickets. The most common alternative method is to use an airline-branded major credit card, such as a Visa or Mastercard. These cards earn frequent flier miles for the cardholder every time they use the card for any purpose. If you buy a couple of books from Amazon.com, you get miles. Fill your car with gas, you get miles. The offer usually provides one mile per dollar spent, but the airlines sometimes sweeten the deals under certain circumstances.

It seems, on the surface, to be a good deal, and consumers are now using their cards for all manner of spending, and not for small dollars, either. People have used the cards for plastic surgery, home remodeling, and all manner of other, high-priced expenses that would generally be funded in other ways, such as with a home equity loan. Ultimately, such financing usually comes into play, as savvy consumers pay off the high credit card balances with home equity loans. They get the miles and then get the opportunity to pay off the balances at lower interest rates using other means.

That’s fine, but are these affinity cards all they’re cracked up to be? Are there drawbacks? As it happens, there are.

There are three significant drawbacks to earning miles with these cards, and any consumer who is concerned about their finances should consider them before applying for such a card:

• Annual fees - These cards, more often than not, include a hefty annual fee. While most consumers with adequate financial history can obtain a Visa or Mastercard with no annual fee, these airline cards come with annual fees that can amount to as much as $85 per year. That’s a lot of money for the privilege of earning frequent flier miles; you should determine if you are going to travel enough to justify paying the fee.
• High interest rates - These accounts tend to have higher interest rates than other major cards. That isn’t a problem if you pay your bill in full each month, but if you carry a balance from one month to the next, the higher interest will certainly erode any benefit you might derive from using the account in the first place.
• Difficulty in using the miles - Airlines are notorious for having blackout dates that prohibit fliers from using their miles to certain destinations at certain times. Fliers are often frustrated at finally having earned enough miles to fly to Europe, only to discover that they cannot actually book a flight. 

If you want such an account make sure that you can afford the annual fee and that you pay your balance in full each month. Otherwise, you are throwing money away.

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