A Warning About Frequent Flyer Business Credit Cards

When shopping for business credit cards that offer frequent flyer rewards, there are a few things you need to know before selecting one. You should understand the estimated value of airline “miles,” the limitation of miles gained with a credit card, and the possible alternative to frequent flyer rewards that may allow even greater savings. By knowing this information, you may be able to save a bundle on your airline expenses. First, how much is a frequent flyer “mile” worth? The problem with miles is they don’t really mean what they seem like they mean. Generally, when you are loyal to a particular airline, you will gain one frequent flyer mile for each mile you fly. However, redeeming them for free tickets is different for every airline and has nothing to do with how many “real” miles your trip will be. In general, many airlines offer a free ticket for every 25,000 to 50,000 frequent flyer miles accumulated. So with a rewards credit card, which generally award one mile per dollar spent, you would have to charge at least $25,000 on your card to get a free ticket. This may not seem like much, and it is the basis on which many have attempted to ascribe a value to an airline mile. There is not set formula, but estimates range from 1 to 3 cents per mile. Some of this is based on the fact that a typical domestic airline ticket may cost around $250. So 1 cent times 25,000 is $250. Other estimates claim these numbers are a bit low, and that each mile is worth a little more than 2 cents. Almost doesn’t seem worth it, does it? Add to that the limitations some airlines or credit cards place on their airline rewards systems. You MUST check the terms of the credit card you are applying for to see if they have any blackout dates for your airline. Blackout dates are usually during the more popular flying periods, to get paying customers on board instead of your non-paying rewards ticket. Frequently, these blackout dates can be such times as Friday nights and Sunday nights. Check the credit card terms carefully as they change often. Knowing these two drawbacks can make frequent flyer rewards almost pointless. However, there is one alternative you can look into. Many business credit cards offer “cash back” rewards. That is, if you purchase from a participating merchant using the credit card, the card will pay you a small percentage of the purchase price back. Some of these merchants are airlines. And this percentage rate can be anywhere from 1% to 20%, depending on the card and the merchant. These savings can oftentimes be quite a bit better than any frequent flyer miles you could accumulate, now that you know the estimated value of those miles. So what should you do, then? I’d recommend deciding if your company will charge tens of thousands of dollars to it’s business credit card each month or not. If so, you could see quite a benefit from the frequent flyer rewards as free tickets begin to roll in. However, if you won’t be using your card this much, then look into the cash back rewards systems. Share and Enjoy: Print

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