I wanted to explain the differences between all of the types of credit cards and award currencies that I discuss on this blog. This is something that tends to be confusing for those who are new to award travel, so I hope this helps to clarify.
Most credit cards that earn points/miles that you can redeem for travel fall into one of 4 categories:
- Airline co-branded cards
- Hotel co-branded cards
- Cards that earn bank points
- Cash-back cards
First of all, always keep in mind that not all points and miles are equal! I wrote a whole post about this. You can read that here.
1. Airline co-branded cards
Examples of Airline co-branded credit cards
- Citi® / AAdvantage® Platinum Select® World Elite Mastercard®
- Barclaycard AAdvantage® Aviator Red World Elite Mastercard®
- Bank of America Alaska Airlines Visa Signature® credit card
- Southwest Rapid Rewards® Premier
What do you earn from airline credit cards?
Airline miles for the airline with which the card is branded. For example, if you have a Citi / AAdvantage Platinum Select World Elite Mastercard®, you will earn American Airlines AAdvantage miles.
Your credit card is linked to your frequent flyer account and the miles post to your airline account a few days after your statement closes each month. Although the credit card is issued by a bank (Citi Bank in this case), the miles earned sit in your airline account, not with the bank.
How many points/miles do you earn per dollar?
It depends on the card, but usually you earn 1 point/mile per dollar on most purchases. Most airline cards give 2 or more points per dollar when you purchase airfare through that airline. Sometimes there are other bonus categories such as dining.
Are miles transferrable?
Generally, airline miles cannot be transferred to hotel programs (such as World of Hyatt), bank programs (such as Chase Ultimate Rewards), or other airlines.
Once you earn the miles, those miles stay in your frequent flyer account and are subject to the airline program’s rules when redeeming. So if you have a Delta credit card, you earn Delta miles. You cannot transfer those Delta miles to American Airlines. You also cannot transfer Delta miles to Delta partners. But you can redeem Delta Skymiles for flights on Delta partners.
Delta’s partners include airlines in the SkyTeam alliance and a few other non-alliance airline partners. So, you can redeem your Delta miles for flights on KLM/AirFrance, a SkyTeam partner. KLM/AirFrance may be operating the flight, but if you book it by redeeming Delta Skymiles, you are subject to the program rules and redemption rates of Delta Skymiles, not KLM/AirFrance’s loyalty program (FlyingBlue).
Do I lose the airline miles if I cancel the credit card?
I wrote about what happens when you cancel a card here, but usually airline miles earned from a credit card sit in your airline account, not with the bank that issues the credit card. As a result, airline miles earned from a co-branded credit card are yours to keep, even if you close the card.
Do miles earned from an airline credit card expire?
Yes, but usually this has nothing to do with your credit card. You are subject to the airline’s expiration policy. Every airline has their own policy and timeline. You can read more about that here.
Benefits of airline co-branded credit cards
One thing to note about airline credit cards is that they often come with perks that may make the card worth keeping open even after you’ve earned the sign up bonus. Benefits such as a free checked bag may be worth more than the annual fee! I will discuss this topic in a separate post.
I do not suggest airline co-branded cards for beginners or for anyone under 5/24*
*If you do not know what I am talking about, read this post about Chase’s 5/24 policy.
I will cover 5/24 as it relates to airline and hotel credit cards in a separate post.
The main reason I do not suggest opening airline co-branded cards if you’re just beginning is because of the Chase 5/24 rule. Once you’ve opened the Chase cards you want and you’re ready to open more, airline cards make it possible to earn a large amount of miles thanks to sign-up bonuses.
I do not use airline or hotel credit cards for everyday spending, because I prefer transferrable bank points.
Airline co-branded cards are great for sign-up bonuses, especially if you’re over 5/24. They’re also good for the benefits they provide such as a free checked bag. But for everyday spending, I suggest using credit cards that earn transferrable points rather than cards that earn miles with just one airline.
2. Hotel co-branded cards
- Hyatt Credit Card from Chase
- Marriott Rewards® Premier Plus Card from Chase
- The Starwood Preferred Guest® Credit Card from American Express*
- Hilton Honors card from American Express
*Note that the sign up bonus is not good on this card at the time of this post, but a better offer is expected soon. If you do not already have one and want to open one, I suggest waiting. You can find my favorite current deals on the ‘offers’ tab at any given time!
What do you earn?
Hotel co-branded credit cards earn points with a certain hotel loyalty program. Like airline cards, your hotel credit card is linked to your hotel loyalty account and the points earned usually post to your hotel account a few days after your credit card statement closes each month.
How much do you earn?
Depends on the card, but many earn 1 point per dollar on most purchases. Usually, paid stays at the hotel is a bonus category, which means you earn more points. Some hotel cards also have additional bonus categories such as restaurants. For example, the Hyatt credit card from Chase earns 3 points per dollar on stays at Hyatt properties; 2 points per dollar on airfare, restaurants, and car rental agencies; and 1 point per dollar on any other purchase.
Are hotel points transferrable?
Hotel points cannot be transferred to bank points such as Chase Ultimate Rewards and American Express Membership Rewards.
Hotel points can sometimes be transferred to airlines, but it is usually a bad ratio*. In other words, I generally do not suggest transferring hotel points to airlines. For example, Hyatt points transfer to several airlines but the ratio is 5,000 points for 2,000 airline miles or worse.
*SPG is an exception, but not for long. You can read more about the merger here. The short version of the airline transfer program is that it is remaining the same, but changes to the SPG credit card result in a devaluation in the amount of points earned. For that reason, I do not suggest using the SPG card for everyday spending after August 1, 2018.
If I cancel a hotel credit card do I lose the points?
I wrote about what happens when you cancel a card here, but usually hotel points earned from a co-branded credit card are yours to keep, even if you close the card. Like airline miles, the points earned from a hotel co-branded card sit in your hotel loyalty account and usually have nothing to do with the bank that issues your card once they post to your hotel account.
Do points expire?
Yes, but again this usually has nothing to do with your card being open or not. You are subject to the hotel program’s expiration policy. You can read more about that here.
There are always exceptions, though. One exception that I’m aware of is Hyatt. Hyatt points usually expire after 24 months of inactivity, but if you have a Hyatt credit card from Chase, your points stay active as long as the card is open. Once the card is closed, the points are still yours, but they are subject to expire according to World of Hyatt’s policy.
Are there benefits/incentives to keep a hotel card after earning a sign up bonus?
Like airline cards, the top reason to open a hotel card would be to earn a sign up bonus. But there are other benefits that may make some worth keeping even after the first year.
Some hotel cards give you automatic loyalty status without having ever stayed a single night at the property. Usually the status is just mid-tier for which the card may not necessarily be worth keeping open. For example, the Hyatt card from Chase gives you automatic World of Hyatt Discoverist status. Some cards earn status but only after a specified amount of annual spend. If you spend more than $30,000 per year of the Starwood Amex, you earn SPG gold status. I do not think status alone is a reason to keep a card open, but this is a personal preference. Some people value status more than others.
Some hotel cards give you an annual free night for certain categories. For example, the Chase Hyatt card comes with an annual free night at any category 1-4 property. This alone can be worth more than $75, and this is a benefit that may make me keep a hotel card open, even if I never actually put any spend on the credit card.
Why I do not suggest hotel credit cards for beginners
For most beginners, there are other credit cards that should take priority.
As I stated in the airline cards section, opening hotel cards for sign up bonuses and for people who are over 5/24 makes sense. Keeping a hotel card after you earn the bonus also makes sense if you find value in the benefits such as a free night.
As with airline cards, I do not use hotel cards for everyday spending because I would rather earn flexible bank points.
Hotel co-branded cards are great for sign-up bonuses, especially if you’re over 5/24. They’re also good for the benefits they provide such as an annual free night. But for everyday spending, I suggest using credit cards that earn transferrable points rather than cards that earn points with just one hotel program.
3. Bank credit cards
What do you earn?
Citi also has a premium card that earns bank points called Citi Thank You points. I have not yet opened this card, but I may in the near future!
Barclay just released a rewards card that has airline transfer partners. There’s one particular airline partner (Japan Airlines) that makes me very interested in Barclay’s transferrable currency. At the moment, there is no sign up bonus, so I’m going to hold off.
How much do you earn?
One of the reasons that makes these programs even better is that some of the cards have bonus categories. Some of these cards earn 2-3 points on purchases that fall into certain categories such as dining, travel, gas stations, and grocery stores. For example, the Chase Sapphire Reserve earns 3 points per dollar on dining and travel purchases. This is higher than category bonuses on most airline and hotel branded credit cards.
Are points transferrable?
YES! This is the main reason that I highly encourage these cards.
- American Express Membership Rewards has 16 airline partners and a few hotel partners.
- Chase Ultimate Rewards has 9 airline partners and a few hotel partners.
Bank points are NOT transferable to other banks. For example, you cannot transfer Chase Ultimate Rewards to American Express Membership Rewards and vice versa.
In addition to transferring these points to airline and hotel partner loyalty programs, you can also use your points to book travel through the travel booking portal. Basically, this means you’re using your points as cash to book. You can read more about that here. As I’ll explain below with cash back cards, transferring to partners is generally going to be a better value than redeeming for cash.
If I cancel a card that earns bank points, do I lose the points?
If you cancel a bank card, you will lose your points. There are a few ways around this though, and sometimes there is a grace period.
Do bank points expire?
Generally, no. Not as long as your card is open and the points are in the UR or MR account.
Once points are transferred to an airline or hotel, they are no longer associated with Amex Membership Rewards or Chase Ultimate Rewards and you will need to check the airline or hotel’s expiration policy.
Benefits of bank reward currency cards
In addition to the ability to transfer to multiple partners, some bank point reward cards come with several other great benefits such as travel credits and lounge access.
Some also come with travel protection and primary rental car insurance.
Why I DO suggest these for beginners
I suggest these programs to almost everyone for sign-up bonuses and for everyday spending. A Chase Sapphire card is going to be the best starter card for most people. Chase Sapphire cards are subject to the 5/24 policy, so you definitely will want to open one before you get over 5/24!
4. Cash back credit cards
Examples of cash back cards
What do you earn?
Either cash back or “miles” or “points” to be redeemed as cash. Usually 1 point/mile=1 cent when redeeming. For example, 10,000 miles earned from the Capital One Venture card would be redeemable for $100 worth of travel. Some cash back cards are specific to travel and only allow you to redeem for travel-related expenses. Others allow the cash back to redeemed on just about anything. Some will even send a check or direct deposit to your bank account.
I think a lot of people get confused here because some cards call the rewards “miles” or “points” rather than what it actually is (cash back).
How much do you earn?
Usually 1-2 points/miles/cents per dollar. Some cards, such as the Chase Freedom and Discover It cards, have bonuses. Both of these cards have categories that change quarterly in which you earn 5 points (5%) per dollar.
Can cash back points be transferred to airlines and hotels?
Usually, no. The whole marketing strategy behind cash back cards is that you can use the cash back for any travel expense with no black out dates rather than having to deal with airline and/or hotel loyalty programs.
One exception is the Chase Freedom card. “Points” earned from Chase Freedom can be converted to Chase Ultimate Rewards points IF you also have a Chase Sapphire card.
If I cancel the card do I lose the rewards?
Similar to bank points, any rewards earned from a cash back card are usually forfeited if you close the associated credit card. You would want to redeem/cash out the cash/miles/points before closing the card.
Do points/miles/cash back earned expire?
No. Not as long as your card is open.
Benefits of cash back rewards
Some people prefer cash back cards because with cash back you have the ability to book any flight and/or hotel on any date you want. In other words, you do not have to worry if a hotel or airline has award availability for the dates you need. Plus you can choose any airline or hotel.
The signup bonuses on these cards are often worth as much as $400-$500. This is a lot, but I value many miles and points cards’ signup bonuses to be even higher. Again, this is a personal preference so that doesn’t necessarily mean opening a cash back card is a bad idea.
Why I do not use cash back cards
I wrote a whole post on this! Click here to read.
The reason I prefer points and miles over cash back cards is because a lot of my strategy is in the redemption. With a cash back card, you’re always going to get a fixed redemption rate. Every card has a different rate, but generally you’re going to get no more than a 2% return on your everyday spending if you use a cash back card.
Once you’re past 5/24 and/or have all of the Chase 5/24 cards that you want, the best cards to open for sign up bonuses will depend on your travel goals. But when it comes to everyday spending cards, I have a clear favorite.
Cash back cards are my least favorite since it’s not possible to improve the redemption rate. My best redemptions have been the result of booking through airline or hotel programs. But airline and hotel credit cards aren’t at the top of my list either. My favorite cards are those that earn transferrable bank points. Why collect miles or points with just one airline or hotel program when you can collect bank points that you can transfer to multiple programs?!