Attractive Airline Rewards Credit Cards Introduced

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Issuers have dramatically enhanced credit card rewards throughout the first quarter of 2011, competing to sign up new cardholders with excellent credit scores. That strategy is a boost for the top tier of cardholders, and it looks like issuers will continue this during the second quarter.

On Wednesday, Chase unveiled a month-long incentive where new cardholders can earn 100,000 miles with the British Airways Visa Signature Card. New card members receive 50,000 bonus British Airways miles after their first purchase and another 50,000 bonus miles after spending $2,500 with the card in the first three months.

If used properly, these 100,000 miles can be used for four round-trip domestic flights within the continental United States on American Airlines, or two round-trips from certain cities in North America to London on British Airways. The card has two other attractive features: no foreign transaction fees and 1.25 miles on British Airways for every dollar spent on the card (2.5 miles for every dollar spent on British Airways). But the card does have a $95 annual fee, which is not waived during the first year like so many other reward cards.

The airline rewards category has seen some attractive offers in 2011 including:

  • Capital One just ended its heavily promoted “Match My Miles Challenge” on the Venture Card. When a credit card consumer opened a new account, the issuer matched up to 100,000 miles a consumer had in any airline credit card reward program once the new cardholder spent $1,000 in the first three months on the card. Capital One ended the program yesterday, quickly reaching the program’s limit of one billion miles.
  • Chase also has attractive offers on both the Continental Airlines One Pass Plus Card and the United Mileage Plus Card. Consumers receive $50 cash back and 25,000 bonus miles after the first purchase on either card. Cardholders can also earn 5,000 bonus miles for adding an authorized user to your account. Both cards waive the annual fee during the first year ($85 for Continental, $50 for United).
  • The Citi Gold/AAdvantage World MasterCard gives a new cardholder 30,000 miles on American Airlines after the consumer makes $750 in purchases during the first four months. The $50 annual fee is waived for the first year.

“There are some great airline offers on the market, but consumers need to be aware that many of these cards come with a higher interest rate,” says Bill Hardekopf, CEO of and author of The Credit Card Guidebook. “If you carry a balance on your credit card account, these cards can cost more in the long run, despite the attractive rewards.”

Competition among issuers is extremely high as credit card companies try to attract the consumers with the lowest risk: those with high credit scores.

According to Mintel Compermedia, credit card offers have more than doubled – from 551 million at the end of 2009 to 1.4 billion at the end of 2010. Consumers with good or excellent credit scores are receiving the majority of these solicitations, and rewards seem to be the bait being used to attract new customers. Eight in 10 offers are for reward cards promoting points, miles or cash rebates, up from six in 10 offers in 2008.

Issuers offer reward cards expecting an increase in spending. They also want consumers to use that card for all purchases instead of using cash, check, debit cards, or other credit cards. Issuers make money from the interchange fees as well as the finance charges that grow when cardholders carry debt.

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