Current best credit card offers?
January 26, 2011 12:37 PM Subscribe
What is the best Credit Card gimmick offer right now? (redux from 2008)
and how can they afford to give 75,000 miles for $1000 in purchases?
(And yes, I know credit card companies pay money to the airlines to buy the miles, but 75,000 miles does not cost them a lot, and it doesn't cost the airline a lot to provide them. Miles let the airlines keep customers happy, and smooth over operational inefficiencies, like flights that are not 100% booked. It's a good deal for them.)
posted by jrockway at 1:12 PM on January 26, 2011
posted by jrockway at 1:12 PM on January 26, 2011
I used to work in the points/miles industry and it's a huge machine. The card companies give out loads of points/miles, pay another company to manage the points and redemptions, pay for the redemption itself (stuff, cash, flights, etc.) and STILL make a ton of money off of you. They have it figured out.
That said, the bonus programs have been getting much more conservative over the past few years and most companies won't give you much, if any, rewards program unless you have very good credit and/or a long history as a customer.
I can't answer your question about the best current gimmick, but there's a decent list/comparison available at CreditCards.com. You can also compare current offerings by other criteria on their main site. I'm not a huge fan of the site, but maybe it's a starting point.
posted by Clinging to the Wreckage at 1:24 PM on January 26, 2011
That said, the bonus programs have been getting much more conservative over the past few years and most companies won't give you much, if any, rewards program unless you have very good credit and/or a long history as a customer.
I can't answer your question about the best current gimmick, but there's a decent list/comparison available at CreditCards.com. You can also compare current offerings by other criteria on their main site. I'm not a huge fan of the site, but maybe it's a starting point.
posted by Clinging to the Wreckage at 1:24 PM on January 26, 2011
Miles don't necessarily buy you a seat that would have been empty. Virgin America and now Southwest, among others, allow you to purchase any seat with points with no blackout dates. Plus, they're not going to give you that sweet 75k miles unless you meet very strict credit guidelines.
posted by speedgraphic at 1:26 PM on January 26, 2011
posted by speedgraphic at 1:26 PM on January 26, 2011
What is the best Credit Card gimmick offer right now?
If you mean reward programs, my trusted source is FatWallet. The card that is best for you depends a lot on what you spend your money on, since most of the cards have a higher percentage for certain types of purchases and a lower flat rate for everything else. Also, rewards cards vary wildly in terms of what form the rewards take (cash, miles, etc.) and how easy/often you can redeem them.
how can they afford to give 75,000 miles for $1000 in purchases?
The relative value of miles vary from airline to airline since they all have different rules and whatnot, but the conventional wisdom is that they are worth (to you) about one to two cents per mile. From the airline's perspective, they are worth much less than that. From the same linked article:
American airlines ignore all miles in individual accounts until they reach blocks of 25,000 miles (the minimum required for a domestic ticket). Then, for each 25,000-mile block of unredeemed miles, they enter a liability of only $20-25. They also assume, on average, that one third of miles will never be redeemed. Taking all this into account, in 2004 the 14 biggest American airlines posted a total liability of only $3.9 billion to allow for future frequent-flyer mileage redemptions, according to IdeaWorks, a consulting firm.
For credit cards specifically, ones that pay out rewards tend to do so at 1 cent per mile compared to similar cash rewards cards. So your 75k miles per $1000 charges would be similar to a 0.75% cash back card (which is okay but not the best currently available in cash back cards). Oh, and the reason why credit card companies can give you 1-2% cash back (or the equivalent in miles) on your purchases is that they charge merchants a higher percentage than that in transaction fees, and on top of that they make money from interest and fees from the actual credit card holders. The rewards have come down over the last few years, probably due to tougher laws around credit lending and the slowdown of the economy in general (although the credit card companies aren't exactly going bankrupt).
Plus, they're not going to give you that sweet 75k miles unless you meet very strict credit guidelines.
Right, rewards cards in general will require you to have good credit. If you know your FICO score, a lot of forums like the FatWallet one I linked to will discuss what credit scores people had and their own luck at getting accepted. Applying for a credit card (regardless of whether or not you get rejected) will result in a minor ding on your credit score of a few points, so you probably want to be reasonably sure that you will get accepted before you apply.
posted by burnmp3s at 2:00 PM on January 26, 2011 [1 favorite]
If you mean reward programs, my trusted source is FatWallet. The card that is best for you depends a lot on what you spend your money on, since most of the cards have a higher percentage for certain types of purchases and a lower flat rate for everything else. Also, rewards cards vary wildly in terms of what form the rewards take (cash, miles, etc.) and how easy/often you can redeem them.
how can they afford to give 75,000 miles for $1000 in purchases?
The relative value of miles vary from airline to airline since they all have different rules and whatnot, but the conventional wisdom is that they are worth (to you) about one to two cents per mile. From the airline's perspective, they are worth much less than that. From the same linked article:
American airlines ignore all miles in individual accounts until they reach blocks of 25,000 miles (the minimum required for a domestic ticket). Then, for each 25,000-mile block of unredeemed miles, they enter a liability of only $20-25. They also assume, on average, that one third of miles will never be redeemed. Taking all this into account, in 2004 the 14 biggest American airlines posted a total liability of only $3.9 billion to allow for future frequent-flyer mileage redemptions, according to IdeaWorks, a consulting firm.
For credit cards specifically, ones that pay out rewards tend to do so at 1 cent per mile compared to similar cash rewards cards. So your 75k miles per $1000 charges would be similar to a 0.75% cash back card (which is okay but not the best currently available in cash back cards). Oh, and the reason why credit card companies can give you 1-2% cash back (or the equivalent in miles) on your purchases is that they charge merchants a higher percentage than that in transaction fees, and on top of that they make money from interest and fees from the actual credit card holders. The rewards have come down over the last few years, probably due to tougher laws around credit lending and the slowdown of the economy in general (although the credit card companies aren't exactly going bankrupt).
Plus, they're not going to give you that sweet 75k miles unless you meet very strict credit guidelines.
Right, rewards cards in general will require you to have good credit. If you know your FICO score, a lot of forums like the FatWallet one I linked to will discuss what credit scores people had and their own luck at getting accepted. Applying for a credit card (regardless of whether or not you get rejected) will result in a minor ding on your credit score of a few points, so you probably want to be reasonably sure that you will get accepted before you apply.
posted by burnmp3s at 2:00 PM on January 26, 2011 [1 favorite]
For credit cards specifically, ones that pay out rewards tend to do so at 1 cent per mile compared to similar cash rewards cards. So your 75k miles per $1000 charges would be similar to a 0.75% cash back card (which is okay but not the best currently available in cash back cards).
Correction: at that rate, 75,000 miles is equivalent to $750, so the rate is actually 75%.
posted by teraflop at 2:27 PM on January 26, 2011 [1 favorite]
Correction: at that rate, 75,000 miles is equivalent to $750, so the rate is actually 75%.
posted by teraflop at 2:27 PM on January 26, 2011 [1 favorite]
What is the best Credit Card gimmick offer right now?
Chase Freedom gave me $100 for signing up. The rewards program is pretty good too -- I'm getting 5% at grocery stores and drug stores right now. Everything else 1%.
posted by oreofuchi at 2:37 PM on January 26, 2011
Chase Freedom gave me $100 for signing up. The rewards program is pretty good too -- I'm getting 5% at grocery stores and drug stores right now. Everything else 1%.
posted by oreofuchi at 2:37 PM on January 26, 2011
I have never seen that kind of free mileage rates. Usually you see something like 25,000 miles on a card that normally has a $75-100 annual fee that is waived the first year. For instance. That might cost them $100-150 which they figure they will easily make up in future annual fees plus finance charges plus merchant fees.
My favorite current card is the Citi Forward. 8500 pts for signing up (around $85) and 5 pts per dollar on restaurants and Amazon (around 5%). It's actually better than the Amazon branded card.
posted by smackfu at 3:19 PM on January 26, 2011
My favorite current card is the Citi Forward. 8500 pts for signing up (around $85) and 5 pts per dollar on restaurants and Amazon (around 5%). It's actually better than the Amazon branded card.
posted by smackfu at 3:19 PM on January 26, 2011
This thread is closed to new comments.
Basically, you are getting something that doesn't cost a lot of money because of the interest that the mathematical models predict you will pay over time.
posted by jrockway at 1:11 PM on January 26, 2011