Ask an Expert: Are Airline Credit Cards Always the Right Way to Purchase Airfare?

This post comes from Jason Bushey, a personal finance blogger and credit card analyst from Creditnet.com.

I recently received this question from a Money Talks News reader:

I’m looking to save some cash on airfare for an upcoming summer flight. Would you recommend paying with an airline miles credit card, or are there other cards available that can save me even more? — Kevin S.

My response

Kevin’s question is a good one, since so many cash-back credit cards now offer bonus cash-back opportunities of $100 or more within the first three months. We touched on the topic of paying for big purchases with a cash-back bonus card a few weeks ago, but when it comes to airfare purchases consumers now have a choice to make – cash back now or miles later.

Here are some pros and cons to consider:

Cash-back credit cards

If you sign up for a $100 bonus cash-back credit card to purchase airfare, there’s a decent chance you could qualify for the bonus simply by using it to book your ticket(s).

Cash-back cards like the Capital One Cash Rewards and the Chase Freedom card offer $100 when you spend $500 or more in the first three months after you open the account. Thus, you could save yourself $100 plus the advertised ongoing cash back (1 percent for each card) just for making a single purchase with your new card, depending on flight costs. That’s obviously a pretty good deal.

That said, while the one-time bonus can net you some serious savings initially, the ongoing savings opportunities on airfare are pretty limited. Sure, you could apply the cash back you’ve accrued to your next upcoming flight. But after that initial bonus it’s tough to earn a significant amount of cash back in a short amount of time, so the opportunity for a free flight down the line is pretty slim unless you spend, spend, spend with your new card.

Frequent-flier credit cards

The ongoing opportunities for free and discounted flights with an airline miles credit card are where consumers see the real benefit of using this type of rewards card.

There are two trains of thought when it comes to miles cards — co-branded airline credit cards and general miles credit cards. Which is best for you depends on the type of traveler you are — loyal to one brand or a bargain hunter most interested in finding the cheapest flights. That said, both can save you substantially in the long run if you travel often.

The thing about miles cards is that they don’t net you savings on your initial ticket purchase. The savings will be realized on future flights. This is the biggest difference between miles credit cards and their cash-back counterparts.

For instance, the Chase United MileagePlus Explorer Card offers double miles on United purchases. Plus, sign-up bonus opportunities may be available. In Chase United’s case, you get 30,000 bonus miles when you spend $1,000 in the first three months.

Airline cards have additional VIP benefits like free checked bags and airport lounge access that make staying loyal to your favorite airline worthwhile.

One final perk that can give airline cards the nod over cash-back cards in the long run is the value of miles. They vary based on the card, but are often worth more than cash back.

Cash back is almost always worth 1 percent (or 1 cent), whereas the value of a mile is usually worth more, often in the 1.5 percent to 2 percent range. So theoretically it should take less time and money to earn ongoing travel rewards than with a cash-back credit card.

The final verdict

If it’s immediate satisfaction and savings you’re in search of when booking your summer flight, then there is a case to be made for taking the $100 cash-back offer. But if you’re a frequent flier who could benefit from a miles credit card that yields substantial rewards over time, then the miles credit card is still the way to go.