# Frequent Flyer Credit Cards vs Cash Award Credit Cards



## Kauai Kid (Apr 5, 2013)

The FF card returns so many points for purchases.  Get enough points and you'll get a free airfare if you're lucky and flexible and remember to start looking 331 days prior to your flight.  No fee for the bronze card, $85 for platinum.

My cash award card returns 5% on gasoline, 3% on groceries, and 1% on everything else.  Eventually I'll have enough to purchase a ticket on any airline I choose at any time I want.  The credit card doesn't have any annual fee.

Hopefully there are some financial guru's out there in TUG land who can explain which is the better deal.

Mahalo (thanks in Hawaiian),

Sterling


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## mav (Apr 5, 2013)

Great question. I would love any input also. I do make a LOT of cash back per year on my cash rewards credit cards. I charge EVERYTHING, even if it is for a $1 purchase and pay the balance in full every month.


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## ronparise (Apr 5, 2013)

mav said:


> Great question. I would love any input also. I do make a LOT of cash back per year on my cash rewards credit cards. I charge EVERYTHING, even if it is for a $1 purchase and pay the balance in full every month.



My card isnt a 5-3-1-card, everything is at 1%, and mines a debit card, not a charge card, and like you, everything goes on it. But for me the best feature is the email I get each time I spend some money...(or my wife does)


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## Ken555 (Apr 5, 2013)

Fidelity has a 2% cash back card. Why limit yourself to just 1% when there are much better options? 

Before we all start posting the same info again and again, I also suggest you search TUG for the related threads on this topic. Many of us have posted about this issue just recently, and it seems to be a recurring issue.


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## winnipiseogee (Apr 5, 2013)

I post this only because I just learned about it yesterday and I consider myself pretty sophisticated when it comes to CC points (last year I earned just shy of a million 

Amex has a new card combo where you get 5-3-1 points but... if you use the cc points to book flights via amex you get a 20% rebate back.  For example I just booked some flights that cost $500 or 50,000 in CC points.  Within a day amex rebated my 10,000 of those points.    

You have to have two cards (gold premium rewards and platinum travel) but I have one for business and one personal so its no hard.  

Amex just introduced this at the end of Dec so it thought it worth mentioning.


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## Kauai Kid (Apr 5, 2013)

Ken555 said:


> Fidelity has a 2% cash back card. Why limit yourself to just 1% when there are much better options?
> 
> Before we all start posting the same info again and again, I also suggest you search TUG for the related threads on this topic. Many of us have posted about this issue just recently, and it seems to be a recurring issue.



5% and 3% are better than 2%.


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## x3 skier (Apr 5, 2013)

Cash will buy a ticket anytime but points required vary all over the lot depending on routes and/or inventory. 

www.thepointsguy.com has some good comparisons. 

Cheers


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## Ken555 (Apr 5, 2013)

Kauai Kid said:


> 5% and 3% are better than 2%.



Only for those specific purchase types entitling you to the higher amount. Those cards also have the 1% that covers the vast majority of regular purchases, which happens to be exactly 50% less than the card I mentioned. If you can be diligent with which card you use at which vendor then it may make sense. But, you have to consider whether it's worth the trouble - it won't be for many.


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## Bucky (Apr 5, 2013)

I didn't like the changes that Southwest made to their FF program so I eventually cancelled that card and got the Chase Sapphire card. Now I can get cash back or I've recently bought a couple of bikes and a new desktop computer using points from the Sapphire card. I also transferred 30k of my points to my Southwest account for two RT tickets! The points were transferred almost instantaneously from the Sapphire card to my Southwest account. This card seems to give the best of both worlds for us. Cash back if we want it or the ability to purchase gifts or plane tickets any time we wish.


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## akp (Apr 5, 2013)

*My 2 cents worth*

Think about it this way:  any time you use an airline miles card, you are forgoing the opportunity to earn 2% cash back.  (There are several good 2% cash back cards available.)  So you're basically buying miles at 2 cents per mile if you choose to use an airline card instead of a cash back card.

Sometimes this is the right decision, and often it is not.  

You need to _earn more than 2 miles per dollar_ (easy to do with signup bonuses, category bonuses, shopping portals), OR _get more than 2 cents worth out of each mile_ (somewhat easy to do with international redemptions or outside the contiguous 48.)  

Or both. 

If you want to always be safe, here is the easiest strategy:  Apply for a new card or two (or more) every year (or every 6 months)  for the big bonuses they offer.  Use the card enough to unlock the bonus, then switch to your 2% cash back card.  You don't have to think too hard about which card to use in which situation, and you're best off this way about 85% of the time.

Imagine you spend 50,000 on credit cards this year.  On a typical 1 mile per dollar card (say the american airlines visa), you'd earn 50,000 miles and pay $85 or whatever for the annual fee.

Instead, you could get a new Citi AA Amex with a 40,000 mile bonus after $3000 spend in 3 months.  You spend $3000 on the Citi card then switch to the PenFed card, Amex Fidelity Card, Barclay Arrival card...any roughly 2% cash back card.  You earn 2% X 47000 or $940 cash back, plus the 40,000 bonus.  Clearly better than 50,000 miles.

And the following year, you can open a different card.  There are probably several dozen different rewards cards available, especially if you aren't locked into a certain carrier. 

If you want to add some finesse, and especially if you travel much outside the contiguous 48 US states and Canada, you can work certain credit cards to your advantage beyond the signup bonuses.  Chase Sapphire Preferred pays 2.07 points per dollar on all travel and restaurant charges, for example.  Chase Ink Bold pays 5 points per dollar on all internet, cable, telecommucations.  Chase Freedom has 5% cash back (or 5 points per dollar) on their rotating categories every quarter.  If you don't mind the complexity, you can combine this with the above for this strategy:

- Every 6 months to a year, apply for a card (or a few) for the bonuses.  hit the spend; sock drawer them until their annual fee is due and then cancel.
- Use high bonus category cards selectively as bonuses are available (ie, home improvement, restaurant, movie theater all go on Chase Freedom 2nd quarter)
- Use your 2% cash back for everything else.

Probably the worst option is to stick with a 1 mile per dollar airline card.  You're essentially buying miles at an 2 cents per mile by doing this.

Anita


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## artringwald (Apr 5, 2013)

Kauai Kid said:


> 5% and 3% are better than 2%.



I use my credit cards for just about everything, and groceries and gas only account for 6% of my purchases. If I had used a 5-3-1 card, I would have received 1.23% cash back. I prefer the 2% card. Why not have two cards, one for groceries and gas, and the other for everything else?


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## falmouth3 (Apr 5, 2013)

We have a free Amex Hilton card.  Since we spend $20K on it each year, we are gold members.  I don't have enough nights in Hilton to earn gold with my travel, but when I travel for work or have a personal stay, I get upgraded.  In addition, I get points for Hilton.  It's nice to have those points to use for a special vacation.  Cash is wonderful, but it just gets mixed in with the rest of our money.  I like seeing a vacation sitting in my account.  We spent a week in Paris on the concierge floor for free.  We thought it was great!

Sue


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## MichaelColey (Apr 6, 2013)

akp said:


> Think about it this way:  any time you use an airline miles card, you are forgoing the opportunity to earn 2% cash back.  (There are several good 2% cash back cards available.)  So you're basically buying miles at 2 cents per mile if you choose to use an airline card instead of a cash back card.


This is how I look at it to, and then I just make sure I'm redeeming my miles/points at more than 2 cents per mile/point.


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## Kauai Kid (Apr 7, 2013)

Ken555 said:


> Only for those specific purchase types entitling you to the higher amount. Those cards also have the 1% that covers the vast majority of regular purchases, which happens to be exactly 50% less than the card I mentioned. If you can be diligent with which card you use at which vendor then it may make sense. But, you have to consider whether it's worth the trouble - it won't be for many.



My major expenses are groceries and gasoline.  Too bad no one will give discounts for cash cause that is the way I'd prefer.


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## x3 skier (Apr 7, 2013)

Kauai Kid said:


> My major expenses are groceries and gasoline.  Too bad no one will give discounts for cash cause that is the way I'd prefer.



National stores will not but mom and pop stores will sometimes do that if you ask. 

Cheers


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## Kauai Kid (Apr 8, 2013)

I appreciate all your thoughts regarding the matter.

Mahalo,


Sterling


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## akp (Apr 9, 2013)

Points Guy covers this in his blog today.

The introduction of the Arrival card from Barclay Bank has all the bloggers talking about this one.

Current sign up bonus is 40,000 points which is potentially worth $440 if redeemed for travel.  Annual fee waived for the first year.

In general, if you travel in the domestic 48, you're best off with a 2% cash back card instead of a points earning card for day to day spend.  (Go ahead and get airline cards for the sign up bonus tho!

I have read mixed reviews of the process of redeeming these points from barclay.  I'm applying for it myself soon and will report my experiences when I can.

Anita


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## rickandcindy23 (Apr 9, 2013)

What's the downside of applying for the best mileage/ point cards?  Credit score dings?  Do you formally drop the card and apply anew for the same card?  I froze our credit and rarely unfreeze it, as there is an expense, and it makes me think twice.  It's a good thing.  

I am thinking of doing this with Frontier's Barclay card.  I haven't done this for a while but have few miles with Frontier currently.  I would like to use Frontier more.  Award seats are still always a trick.  

Southwest's card is always tempting with the 50K bonus miles.  I saw akp's post about this card a while back and was sorely tempted to go for it.  We fly Southwest quite a bit to Orlando, California, and now Williamsburg.  I have quite a few miles built up already, so 50K would be great to have.  I am cheap and cannot seem to time the use of the points with the lowest price of the ticket.  I don't want to waste miles.  

We have Alaska's Signature Visa and enjoy the companion code for Hawaii. I also realized recently that 75K for a 1st class seat is a much better value than 2% cash back on Capital One's Venture card, which we use for almost everything.  That may change.  We have a considerable # of timeshares and use the CC for everything.  

Problem is seat availability for 1st class to Hawaii on Alaska is prohibitive for using the miles.  I haven't discovered any tricks to getting the better seats without the stops.  My mother-in-law goes with us and has to fly at the same time.  She is now 86 and just cannot fly without us.  Even if I can get seats with miles, those itineraries are the most expensive for her.


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## isisdave (Apr 10, 2013)

Kauai Kid said:


> 5% and 3% are better than 2%.



Often the 5% and 3% rebate amounts have caps. The Fidelity cards don't. The money goes straight into my IRA where I never see it until the end of the year. It can't expire, I don't have to worry about not being able to buy stuff with it, etc.


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## akp (Apr 10, 2013)

rickandcindy23 said:


> What's the downside of applying for the best mileage/ point cards?  Credit score dings?  Do you formally drop the card and apply anew for the same card?



There is a short term (maybe 3-6 months) drop in credit score of 3-5 points for each hard inquiry on your credit report.

Here is my reference post for learning how applying for new credit will affect your score.

I've been getting cards fairly aggressively for me and my husband for 2 years now, and our credit is as good as ever.

The very best strategy is to combine a solid 2% card (either Fidelity as isisdave describes, or one of the travel ones such as Priceline Visa or maybe even Barclay's Arrival card) with a travel card with a big bonus.  There are so many of these available...you could get 2 new cards a year for the next 10 years and still find that you don't need to repeat.  

And most people find that you can get the bonus a second (or more) time.  The waiting period between the first and subsequent bonuses varies by issuer.  

With the US Airways card from Barclay, many people have reported success getting a second card while the first is still open and getting the signup bonus a second time.  Many more have reported canceling the first card and applying for a second card within days and getting the bonus again.  

The rules are different for Citi, Chase, American Express etc.  but the general rule is that if you know their timing and wait the proper amount of time, you'll be able to get the signup bonus again.

Frontier has a pretty great companion pass for their Frontier Mastercard holders.  

Anita


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## MichaelColey (Apr 11, 2013)

There is an entire sub-forum on FlyerTalk.com devoted to credit cards, bonuses, etc.  If you're going to churn them like Anita suggested, you can learn a lot in a short period of time there.

Keep in mind that every application will cause a "hard inquiry" on your credit report, and that while the impact of a hard inquiry is minimal to your score, too many hard inquiries (somewhere around 6-8 in a 6-12 month period, I believe) will cause you to start getting rejected (not just for credit cards, but for car loans, refinances, etc).

I would suggest doing no more than 2-4 new credit cards per year, and choosing the ones that are the most beneficial to you.


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## akp (Apr 11, 2013)

MichaelColey said:


> If you're going to churn them like Anita suggested, you can learn a lot in a short period of time there.



My response about getting the bonus for the same card multiple times was in response to someone asked about applying anew for the same card.

In case I gave the wrong impression with my response, I wanted to clarify that I personally do not recommend "churning".  

I recommend a much more conservative approach personally.  My recommendation would be:

1)  to pick a card (or two, maybe 3) that meets a specific travel goal for the next year or two.  Meet minimum spend on those cards and put them away unless they have high bonus categories.

2) Use a solid 2% cash back or 2% travel card for all other expenses.

3) The following year, repeat.  

Anita


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## Kauai Kid (Apr 11, 2013)

isisdave said:


> Often the 5% and 3% rebate amounts have caps. The Fidelity cards don't. The money goes straight into my IRA where I never see it until the end of the year. It can't expire, I don't have to worry about not being able to buy stuff with it, etc.



My card doesn't have limits.  I'll check with Vangard to see if they have something similar to Fidelity's card.

I wonder if you can use the rebate cards to pay taxes?

Believe I'll check consumer reports analysis on credit cards too.

Sterling


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## SMHarman (Apr 11, 2013)

akp said:


> In case I gave the wrong impression with my response, I wanted to clarify that I personally do not recommend "churning".
> 
> I recommend a much more conservative approach personally.  My recommendation would be:
> 
> 1)  to pick a card (or two, maybe 3) that meets a specific travel goal for the next year or two.  Meet minimum spend on those cards and put them away unless they have high bonus categories.


Put them away or cancel befor the 1 or 2 year anniversary if they have an annual fee.


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## akp (Apr 11, 2013)

Kauai Kid said:


> My card doesn't have limits.  I'll check with Vangard to see if they have something similar to Fidelity's card.
> 
> I wonder if you can use the rebate cards to pay taxes?
> 
> ...



You can use credit cards to pay taxes.  The best rate now for a Visa or Mastercard is 1.89%.  For any miles earning card, not worth it.  If you're using a 2% cash back card, you'd just cover the fees.  (I believe that under some conditions, the fee is deductible which might make it more worthwhile.)

You can also pay taxes with a debit card for a flat fee, usually around $3.50.  The only mileage earning debit card available currently that awards miles for tax payments is the SunTrust Delta debit card.  The debit card carries a $75 annual fee.  

If you have a lot due when you file your taxes or via quarterly estimates, it may be worthwhile.  For example, due to a change in my husband's corporate structure, we'll have no withholding now, and our entire tax liability will be paid via quarterly estimates.  The Delta miles we will earn will more than offset the $75 fee plus $3.49 per payment.  

Anita


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## akp (Apr 11, 2013)

SMHarman said:


> Put them away or cancel befor the 1 or 2 year anniversary if they have an annual fee.



Before you cancel, ask the issuer if they'll waive the annual fee or give you any kind of deal.  

With my Citi AA Visa, they waived the $95 annual fee for the second AND gave me an extra 1000 AA miles per month for any month I spend $1000 or greater. 

Anita


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## Conan (Apr 11, 2013)

Two more considerations:

1.  An important advantage of having the airline's affinity (branded) card is it waives the basic baggage fee, equivalent to saving $50 to $70 or more on each roundtrip ticket.  That's true whether you're buying a ticket for money (accumulating miles) or buying a ticket with points (spending miles) so long as you put the charges on the card.

2.  When you're spending miles, they're much more valuable if being spent on transatlantic travel and/or business class travel.  I was just looking at American Airlines from New York to St. Thomas V.I.  Economy roundtrip tickets were available for 35,000 points, but the same tickets were selling for $316.  Alternatively, business class seats were available for 60,000 points, and those seats were selling for $1,200.  So points are worth less than 1 cent if you spend them on economy, but 2 cents in business on that route. (Business class seats to Europe, if it's 100,000 points for a $3,500 business class round trip, are worth 3.5 cents per point.)  So I decided to pay cash for economy seats this time, and build my points balance for a future trip to Europe.


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## am1 (Apr 11, 2013)

Conan said:


> Two more considerations:
> 
> 2.  When you're spending miles, they're much more valuable if being spent on transatlantic travel and/or business class travel.  I was just looking at American Airlines from New York to St. Thomas V.I.  Economy roundtrip tickets were available for 35,000 points, but the same tickets were selling for $316.  Alternatively, business class seats were available for 60,000 points, and those seats were selling for $1,200.  So points are worth less than 1 cent if you spend them on economy, but 2 cents in business on that route. (Business class seats to Europe, if it's 100,000 points for a $3,500 business class round trip, are worth 3.5 cents per point.)  So I decided to pay cash for economy seats this time, and build my points balance for a future trip to Europe.



Only if that business class seat is worth $3500 to you.  Anyone trying so hard to accumulate points, miles cash would not spend $3500 cash for a business class seat.


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## ondeadlin (Apr 11, 2013)

I have an Amex that gives me 5 percent back on gas and groceries, and a Capital One card that gives me 2 percent back on everything else.  Obviously, I use the Amex for gas and groceries and the Cap One card for everything else.

I've compared the yield for these cards pretty closely with the Marriott Rewards card and the various Delta and Southwest cards.  Unless you're traveling 50+ nights in Marriotts per year (or less, but spending a ton), the cash cards are a better deal IMO.


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## Ken555 (Apr 11, 2013)

am1 said:


> Only if that business class seat is worth $3500 to you.  Anyone trying so hard to accumulate points, miles cash would not spend $3500 cash for a business class seat.



This is the one instance where I disagree with you, while I would normally agree with this perspective. Here's why: when I travel internationally I really want a larger seat, more room, etc. I won't necessarily pay that $3,500 (or much more) for a business seat, but I definitely want it. The value to me is high. Higher than sitting in coach. So, it's a great perk for having spent the time and effort to accumulate miles. 

That said, of course I wouldn't spend miles on domestic travel, with the only exception being Hawaii since that often can be justified by higher value per mile when buying on points.


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## x3 skier (Apr 11, 2013)

Ken555 said:


> This is the one instance where I disagree with you, while I would normally agree with this perspective. Here's why: when I travel internationally I really want a larger seat, more room, etc. I won't necessarily pay that $3,500 (or much more) for a business seat, but I definitely want it. The value to me is high. Higher than sitting in coach. So, it's a great perk for having spent the time and effort to accumulate miles.
> 
> That said, of course I wouldn't spend miles on domestic travel, with the only exception being Hawaii since that often can be justified by higher value per mile when buying on points.



Total agreement except Hawaii since I don't go there. 

I usually get a paid Biz Class ticket to Europe over the Thanksgiving weekend since they typically go for ~$2000 RT. My annual trip to Allen House is either in First or Business Class for between 100K and 125K on AA or DL. Still have around 1.2 Million miles to go. 

Cheers


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## Carolinian (Apr 12, 2013)

Given the milejacking going on at many airlines in devaluing miles, the cash back cards are probably a better bet.


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## Kauai Kid (Apr 12, 2013)

ondeadlin said:


> I have an Amex that gives me 5 percent back on gas and groceries, and a Capital One card that gives me 2 percent back on everything else.  Obviously, I use the Amex for gas and groceries and the Cap One card for everything else.
> 
> I've compared the yield for these cards pretty closely with the Marriott Rewards card and the various Delta and Southwest cards.  Unless you're traveling 50+ nights in Marriotts per year (or less, but spending a ton), the cash cards are a better deal IMO.



Has the AMEX got a yearly fee?

Thanks,

Sterling


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