American Express 
American Express
 
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So you want to get free airline tickets: Should you get a travel
reward or cash back credit card? by Nick Lian
Travel or Cash Back Credit Cards?
If you want to use a reward credit card for getting free airline tickets,
you have a choice of choosing a dedicated airline credit card, a travel
reward credit card or a cash back credit card. A dedicated airline credit
credit card has hefty annual fees and may not be worth it if you are not a
very frequent traveller or spend enough on your credit card.
So should you get a no annual fee travel reward or cash back credit card
to earn your free airline ticket? This articles explains how you should go
about making this decision.
Let is assume we now have one reward credit card and one cash back credit
card to choose from. The reward credit card pays one point for every
dollar you spend on purchases. The cash back credit card pays a 1% rebate.
Essentially, they both have identical payout formula of 1%. Let us assume
both have no annual fee (very realistic) and both have identical apr.
Would there be any difference between the two credit cards? Should we be
indifferent? How do we decide which is better?
How much does your typical vacation airline ticket cost?
The most important factor that in this decision is actually the average
cost of your airline ticket when you take your vacation. Why? Because most
travel reward program (in fact, most frequent flyer program) require that
you earn 25,000 miles or points to redeem a roundtrip restricted economy
ticket within continental US. You are required to purchase the ticket
either through the specific airline directly (in the case of a specific
frequent flyer program) or through the reward program's agent. If you have
a cash back credit card, 25,000 points will get you a $250 cash rebate
(assuming a 1% formula).
But we all know that a domestic economy ticket cost can vary anywhere from
about $99.00 to $350.00. If you are flying short haul, you can get a
$99.00 ticket from a low cost discount carrier. If you fly from coast to
coast, you are likely to have to folk out over $300 for a ticket. If you
use get a special deal from expedia or priceline, you may get it cheaper.
Choose a cash back credit card if you airline ticket cost less than
$250
Hence, it is very important to know your vacation habits. Where do you
tend to go for your vacations? How much does your average airline ticket
cost you? If you tend to fly short haul to a nearby place for your
vacation and your airline ticket cost about less than $250 (say for
example $150), you are better off using cash rebates from a cash back
credit card. This is because you only need to spend $15,000 on your credit
card to get a $150 cash rebate. Spending $15,000 on a reward credit card
only earns you 15,000 points, not enough on most reward program to earn a
free domestic economy flight.
Choose a travel credit card if your airline ticket cost more than $250
However, if you fly long distance (New York to LA for example) and your
airline ticket tends to cost over $300, then using a reward credit card
makes more sense. This is because if you use a cash rebate credit card,
you need to earn over $300 in cash rebates (ie spend over $30,000).
However, with a regular reward program credit card, you only need to spend
$25,000 to earn your 25,000 points.
So if you tend to take vacations that require long haul flights that cost
more than $250, use a travel reward card. If your vacation flights cost
less than $250, use a cash rebate credit instead. Some reward program only
require 22,000 points to redeem a domestic roundtrip flight. In that case,
use $220 or 22,000 points as your guide when you are choosing between a
travel or cash back credit card.
About the Author
Nick Lian
http://www.compare-apply-credit-card-online.com
Credit card tips, news and reviews for those looking for a credit card
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Discover CardŽ 
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