Is a Miles card right for me?

[Lemming]

Hi,

I've utilized this forum a long time and reading all the posts and helpful responses has been invaluable, so thank you to everyone for that. I have a specific question that I cannot figure out a clear answer for. Here is all the pertinent information.

1 - I want to take a trip overseas once a year for a week to get to seeing the world. I would love to travel business class if I could do it for the same price as coach, however, wouldn't we all?  ;-)

2 - My FICO score is 722

3 - I spend about 1.5k to 2k a month on cards that I pay off the same month.

3 - I will be focused on finding cheap flights to Europe for 2 people and visting 2-3 bordering countries a trip staying in the best bang for buck reasonably priced hotels I can find.

4 - I do not travel for work and get none of those free miles some other folk do.

So, would I benefit from a Miles card or should I just stick to my Cashback cards? If I would benefit, how so, and what card would you recomend?

[takeshi74]

As always, the answer is run the numbers for your spend and look at redemptions.  Redemptions have a significant impact  on reward value with miles/points cards (that are not simply restricted cash back cards).  You need to look at the transfer partners for a given program and see if you can make use of those partners.  Also consider the conversion rates and fees when calculating reward value.   Consider how long it would take you to accrue the miles/points youwould need based on your spend, earn rates and redemption rates and calculate what value you would get per mile/point.  Compare that to what your spend would earn you via cash back and go with the larger number and/or other considerations important to you.

I have arbitrarily selected a United flight from Houston to London (IAH-LHR) as an example.  This flight in Novmember would cost $1,980 or 60K miles.  At a 1x earn rate that means 60K in spend is required to accumulate enough UR points to transfer 1:1 to United.  With 18-24K spend that's nearly 3 years of spend.  However, your spend may fall into categories that qualify for higher earn rates so you have to take that into consideration.  You might also be able to find sign on bonuses with cards that help to get you there more quickly.

In any case, if you had a 2% card you'd earn $1,200 cash back on that same $60K spend.  If 3 years is too long to wait to redeem then taking the cash back and just paying for the flight may make more sense even though you'd get $780 in additional value via UR in this particular instance.

The problem with these questions is that there are a lot of variables at play.  Not only do your spend categories and the earn rates on a card have an impact but the travel companies you can use and the flights you redeem for will also have an impact on the value of your rewards.  Some programs do not transfer 1:1 to travel partners.  Some transfers will incur additional fees.  The flights you're looking to redeem for may have a higher or lower dollar value.  You have to look at the details of the different rewards programs, see what suits you, consdier your travel plans and do some number crunching to compare.  It is possible to end up getting much more value with travel cards, however it is also possible to end up with much less value.  It all depends on the specifics.

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@Lemming wrote:

I want to take a trip overseas once a year for a week to get to seeing the world.

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Using that info might be an easier approach than the general info I provided above.

Given that you want to to do this and that your spend is 18K to 24K annually, what programs will allow you to redeem for the travel that you're looking to do?  If you're only earning 1x on your spend then can you redeem 18K to 24K miles/points for international travel?

Does your spend qualify for higher earn rates that would change things?  Can you get  sign on bonuses that would help you get there?

If not then your only option may be to go cash back and apply the cash back against your international travel.  It won't complelety offset those costs but it would help to mitigate some of them.

[Callandra]

Takeshi made a great post! Excellent advice there.

I do not have any miles cards but from what I hear, you might need to be flexible with dates (can you do this?) and be able to book in advance. Many people also say that the best value for miles are international business/first class tickets although there are some decent redemptions for short/domestic flights too. What partners would work for you? Do you live near an airline hub (ie- United, Delta, etc)? Often cashback cards make more sense for people (unless you are bonus chasing) depending on the partners and flexibility you have.