Credit Card Options for Travellers
From MyVacationsTo
For most travelers, the two major types of cards to consider are bank-issued credit cards and Travel and Entertainment (T&E) cards. When choosing between them, you'll need to factor in issues of acceptance, awards earning potential, and corporate features.
This comparison is focused on cards that earn travel benefits—specifically, points or miles that you accumulate for purchases charged to the card and that you can use for "free" air trips or upgrades. Needless to say, that excludes hundreds of cards that earn some other sort of benefits or earn nothing at all. Chances are, however, that if you're a business traveler, you're interested in a card that earns travel benefits.
Contents |
[edit] Bank cards
Almost all bank cards are branded as MasterCard or Visa; while they're issued by individual banks and credit unions, they provide worldwide services through the MasterCard/Cirrus or Visa/Plus international networks. Bank cards are true credit cards as well as charge cards: They combine a plastic-purchase charge function with what amounts to a line of credit up to whatever maximum you arrange—a figure that could easily extend to $20,000 or higher. That means you can temporarily carry large purchases for extended periods. Discover is also a bank card, issued only by Discover itself.
For earning flights and other travel rewards, your two primary bank card options are those affiliated with an airline and bank-buys-the-ticket cards offered directly through banks.
[edit] Airline-affiliated cards
Twelve U.S. airlines co-brand charge cards that earn credit in the sponsoring line's frequent flyer program. The AirTran, Alaska, America West, American, Continental, Frontier, Midwest, Northwest, Southwest, United, and US Airways cards are MasterCard, Visa, or both, issued by several leading banks; Delta's card is from American Express/Centurion Bank. Several foreign lines with a large base of U.S. customers, including Air Canada and British Airways, also issue mileage-earning charge cards.
[edit] Advantages
The big advantage to the airline cards is that you can combine the credit you earn through the charge card with the credit you earn by flying. That way, the miles you earn on your charge card can count toward upgrades and flights in business or first class as well as toward ordinary coach trips. And since the mileage required for a business- or first-class seat is usually a bit less than twice the mileage required for a coach seat, frequent flyer credit is the only practical way many travelers can ever fly in the comfort of a premium seat.
[edit] Disadvantages
The downside to airline cards is that frequent flyer seats are often so scarce that, in effect, you can't visit some of the more popular destinations at all. Another disadvantage is that all the airline-sponsored cards now assess a surcharge of 2 percent on purchases in foreign currencies. And, airline cards typically carry high APRs and annual fees.
[edit] Earning miles- The basic math
- On 11 of the 12 U.S. airlines, the earning formula is one mile or point per each $1 charged to the card. Some programs provide double credit on purchases of tickets and vacation packages from the sponsoring airline, as well as occasional double-credit promotions on other purchases. Cash transfers, however, do not earn credit.
- Southwest's frequent flyer program is calculated by Rapid Reward Credits rather than miles. Cardholders get one credit for each $1,200 of purchases (a round-trip award requires 16 credits).
[edit] Bank-buys cards
Several individual banks issue charge cards that earn travel credit in a program run by the bank. You earn one point per $1 you bill to the card; you need between 24,000 and 35,000 points for a domestic round-trip. Some programs provide short-distance tickets for fewer points. Those schedules are about on par with the airline programs.
What's different about these bank cards is that the credit you earn goes into an account at the bank, not into any airline's frequent flyer account. Instead, when you pile up enough points, the bank goes into the marketplace and buys you a ticket.
[edit] Advantages
The award purchase method is the big advantage to the bank programs. You don't have to worry about those very tight limitations on frequent flyer seats: If an airline has a cheap seat available, you get it. All you have to worry about is the standard restrictions on cheap tickets—advance purchase and Saturday-night stay. Plus, annual fees are usually much lower than those of airline cards, and some bank cards carry lower APRs.
[edit] Disadvantages
The main problem with the bank-buys cards is that you can't combine the miles you earn on the card with the miles you earn by flying. And they don't work well (or at all) for premium-class seats or upgrades.
[edit] Travel and Entertainment (T&E) cards
American Express (AmEx) and Diners Club are Travel and Entertainment (T&E) cards. The basic T&E cards are primarily just charge cards: You can bill whatever you need to, often with no set limit, but you have to pay off the bill in full when it comes due (although both cards offer add-on credit options as well).
AmEx and Diners Club both operate programs that award frequent flyer credit for each dollar billed to the card. Travelers can accumulate miles in their card-company accounts and transfer the miles to any of several participating airlines, combining the charge-card miles with the miles they earn by flying.
[edit] American Express
American Express has two program types for earning miles:
- AmEx Membership Rewards points can be converted at the rate of one mile of credit for $1 billed (or roughly equivalent in programs that use credits rather than miles) in the frequent flyer programs of Aeromexico, Air Canada, ANA, Continental, Delta, El Al, Hawaiian, the multi-line GlobalPass program, JetBlue, Mexicana, Song, Southwest, US Airways, and Virgin Atlantic. In addition, AmEx points can be used for flight certificates on Air France, Air Jamaica, Alitalia, Cathay Pacific, Frontier, LAN, Qantas, South African, Swiss, and Virgin Atlantic. Membership Rewards is an extra-cost add-on to Green and Gold AmEx cards; it's included at no extra charge on Platinum cards. Currently, many AmEx cards provide an additional benefit: double points for retail purchases at drug stores, supermarkets, and gas stations—but there's no guarantee that this benefit will carry over into future years.
- AmEx Blue—a true credit card—also earns miles, but at only half the rate of other AmEx cards (one mile for every $2 charged). If you really need a credit card, you're better off with a MasterCard or Visa that gives the more usual one mile per $1 charged.
[edit] Diners Club
Diners Club has one rewards program for all cards:
- Diners Club's Club Rewards points can be converted at the rate of 0.905 mile (or dollar equivalent) per $1 billed to the card into the frequent flyer programs of Aer Lingus, Air Canada, Air France, Alaska, America West, American, Asiana, British, Continental, Delta, El Al, Frontier, Hawaiian, Icelandair, Korean, LatinPass member airlines, Mexicana, Midwest, Northwest, SAS, South African, Southwest, Thai, United, US Airways, and Virgin Atlantic. Diners does not charge extra for Club Rewards.
[edit] Premium and business options
[edit] Premium options
Most bank and T&E cards offer premium options that provide extra services and may or may not entail extra cost. Many bank cards and AmEx offer Gold, Platinum, and even Titanium premium options (will Uranium be next?); Diners Club's premium option is called Carte Blanche. A few cards also offer by-invitation-only, super-premium options.
[edit] Business options
All the major cards offer one or more business or corporate options that combine ordinary credit- or charge-card services with various forms of consolidated reporting and even a degree of managed travel. If you don't want anything more than simple charge- or credit-card functions, you can do with one of the many consumer cards. However, the business/corporate cards usually offer enough in the way of extras to make them preferable. The biggest potential downside to business/corporate cards is that they typically require a several-year credit history and may require that you show minimum assets in the low six figures. Most major card brands also include at least one corporate or business option that is aimed at (or at least includes) small businesses. In addition to the usual features, those specialized cards provide some useful extras. Among the more important:
- Consolidated reporting from multiple cards, including reports broken out by vendor, type of purchase, employee, and such.
- Lightly managed travel features, including compliance with travel policies you establish and reasonably detailed reporting.
- An affiliation with an online travel agency, so you can combine the benefits of that agency's deal with the benefits you get through the card. With some you have the option of a bricks-and-mortar agency, if you choose. Of course, you don't have to use the affiliated agency if you'd rather explore more online options.
- Discounts at a range of suppliers that small businesses use—non-travel outlets, such as office supply retailers, as well as travel suppliers. Although you may well find similar discounts on your own, getting them automatically through your charge card could be a big plus.
You don't have to forgo any other small-business perks to use one of those cards. If you join a big airline's small-business program, for example, you can use both the card and airline features.
Overall, a business or small-business card looks like a good solution for many small businesses. You get widespread acceptance, useful reporting, discounts, primary rental-car collision coverage, and, if you want it, integration with a travel agency. The only stumbling block, for some, may be the credit and asset requirements.
[edit] Other card types for business travelers
[edit] UATP cards
The Universal Air Travel Plan (UATP) issues a separate breed of card, accepted only by airlines, Amtrak, and a few other travel suppliers. UATP was the first real charge card for travel, and in the early days, business travelers carried it as the only non-cash, non-check way to buy air tickets. Holders cannot use basic UATP cards for hotel accommodations, rental cars, restaurant meals, merchandise, or non-travel services—a fact UATP touts as an advantage, to avoid charge-card misuse. However, for travelers who want a multipurpose card, UATP issues cards jointly with Visa that can be used anywhere ordinary Visa is accepted. Although UATP cards are issued by individual airlines, any line's UATP card is accepted by more than 200 airlines worldwide. UATP seems to be an idea whose time has come and gone. But it doesn't hurt to look.
[edit] Debit cards
You can use a debit (ATM) card either as a supplement to a charge card or (in some cases) as a substitute. You can use any debit card to get cash while you're away from home—even overseas.
Most of them are now branded either MasterCard or Visa so you can also use them to make purchases. Instead of maintaining your expenditures or cash withdrawals in a separate account, however, debit cards deduct what you spend or take out directly from the checking account on which they are based. And you normally can't use a debit card to initiate a rental car (or provide collision coverage), although you can pay the final bill with a debit card if you want.
[edit] Comparing card types
Choosing between the credit card types means weighing the specific advantages and disadvantages of each. Here are some general guidelines to help you narrow the search.
[edit] Airline card vs. bank-buys card
Are you better off with an airline card or a bank-buys card? The answer to that question depends on how you use your mileage:
- If you use earned mileage for upgrades and premium-class awards, the airline cards win by a wide margin. Bank-buys cards are virtually worthless for that sort of travel.
- But if you use your mileage for coach trips, your chances of getting a bank-paid seat are far better than your odds on a frequent flyer seat. However, advance-purchase and minimum-stay restrictions on bank-buys tickets may render them useless to you.
[edit] Credit card vs. T&E card
Credit cards are popular with consumers precisely because they offer credit. For that and many other reasons, MasterCard and Visa are accepted far more widely, reportedly at almost 30 million locations worldwide, than either Discover (which is confined to the U.S., Canada, the Caribbean, and Mexico) or the T&E cards. The bank cards' greater reach is especially notable at medium- and low-priced hotels, restaurants, and retail outlets. Millions of businesses accept MasterCard, Visa, or both, but not a T&E card.
T&E cards offer benefits such as airline ticket twofers in premium class, lounge access, and in the case of Diners Club, primary collision insurance for rental cars. T&E cards also add fewer surcharges than many bank cards on purchases abroad.
Even if you select a T&E card as your primary business card, you almost have to have a bank card as a backup for the many places that won't accept your T&E. Still, either T&E card is accepted by virtually all the world's airlines, all the important hotel chains, all the significant car rental companies, and most restaurants other than fast-food joints. As long as a card covers the places you plan to use it, that's all you need.
[edit] T&E card vs. T&E card
Diners Club and AmEx are accepted at around eight million locations each. Although Diners Club can claim it was the original T&E card, AmEx has probably outpaced Diners in the U.S., while Diners seemingly maintains a lead overseas. Diners has made much less of an effort than AmEx to sign up non-travel retailers: Among strictly travel and entertainment suppliers, worldwide, Diners Club is reportedly ahead of AmEx.
Diners has announced a mutual acceptance agreement with MasterCard—a step that would put Diners far ahead of AmEx in worldwide acceptance. Details, however, are not yet available.
Until February 2002, Diners Club was a winner for airline miles by a large margin because it includes five important U.S. lines that AmEx doesn't: Alaska, America West, American, Northwest, and United. Also, its ordinary consumer versions provide primary collision coverage for rented cars. Those features regularly earned it the annual "Freddie" award as the best charge card for travel. Unfortunately, however, Diners Club decided to devalue its airline credit to 9.5 percent, meaning it now earns fewer miles per dollar spent than other cards. And airline alliances mean that you can now use Continental or Delta miles (from AmEx) for frequent flyer trips on Northwest (through the SkyTeam Alliance) and US Airways miles for trips on United (through the Star Alliance).
You can use both AmEx and Diners Club credit for "rewards" other than air travel—convert it to hotel-chain frequent stay programs or use it to buy a variety of merchandise and services. Check out these non-airline options if you want, but you'll probably conclude that frequent flyer mileage is by far the best use of your charge-card credit.