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Guide to airmile credit cards

Airmile cards are amongst the most popular reward credit cards available in the UK. Some airmile cards are specific to individual carriers, others offer points you can use within an airline group (or alliance), but all offer you the same benefit, a convenient way to collect points for use with frequent flyer programs.

Plane in the sky

What are frequent flyer programs?

Frequent flyer programs are reward schemes designed to encourage passenger loyalty to a particular airline.

During the post-war boom of the 1950s and 60s, as demand for air travel increased, competing carriers vied for passengers flying the popular routes. As such, many offered similar destinations from the same airport, and the market for flights became increasing commodified.

Competing purely on price drove down the profit margins of airlines. Mergers and acquisitions created some improved efficiencies within the industry, but airlines needed a better way to drive repeat business.

In the early 1970s, United Airlines became the first airline to reward frequent flyer. Other airlines soon followed suit and refined the concept - linking rewards directly to the number of miles a passenger had travelled.

What are airmile credit cards?

Although airmile cards now rely on the reward platforms of frequent flyer programs, airline payment cards predate frequent flyer programs by around 40 years - airlines being amongst the first suppliers of charge cards.

Of course, today's airmile cards bear little resemblance to air travel payment cards of yesteryear, which limited purchases to a particular airline.

Modern airmile cards offer the freedom and flexibility that all credit cards deliver, and, in some instances, more, since many supply two cards, so more than one payment processor can be linked to the same credit account.

Airmile cards are reward cards designed to benefit three different groups. The credit card issuer benefits from increased card use, as cardholders are incentivised to shop. Airlines benefit from increased loyalty and repeat business, and, of course card holders benefit from discounted flights and other travel associated perks.

Who are airmile cards suitable for?

Although airmile cards are aspirational products, and stories of exciting travel made through their use often appear in the press, these cards are not suitable for everyone. If you fall into one of the following groups, then an airmile card is probably not right for you.

People with bad credit

Most airmile cards are only available to people with good or excellent credit scores. There are a couple of reasons for this. The first is that most airmile cards use American Express. Amex charges merchants higher interchange fees (paid by retailers for accepting card payments) than Mastercard and Visa. This means that issuers can offer more generous rewards, but Amex operates a relatively high eligibility criteria, so only those with good credit are accepted. The second reason airmile cards are not suitable for people with bad credit is that you need higher than average spend levels to accrue enough points to benefit. The low credit limits people with bad credit are offered makes spending sufficiently to benefit from a card very difficult.

People on low incomes

If you have a good credit score, but are on a low income, you are more likely to get an airmile card than someone with bad credit. However, many cards have higher than average income requirements, and even if you find a card with low income requirements, your limited spending power is likely to curtail your ability to earn rewards, or, perhaps, even benefit from a sign-up bonus.

People using revolving credit

If you don't pay off your full balance every month and you roll an amount on, to be paid in the future, then any reward card is unlikely to be a good choice for you. Interest charges, even for a single month, are often higher than the value of the benefits your card supplies. Low rate cards or 0% purchase cards offer a better alternative for people in this situation.

People who don't fly!

It’s common sense, but, you're scared of flying, don't get an airmile card. You won't receive any benefit, and you'll probably shudder every time you use it!

However, if you clear your balance every month (without fail), you have a credit score, good income, and like to travel, then an airmile card could be perfect for you.

How to choose an airmile credit card

You've decided that an airmile card is right for you, how do you get one? Well, there's a number of things you need to consider before choosing which to apply for.

Where do you want to go?

Airmile cards can take you all over the world, but the list of destinations is not exhaustive. So, where do you want to go? If your heart is set on a European city break or a trip to the 'Big Apple', then you'll have no problem. But, if you want to stray from the beaten track, you'll need to check which airlines will take you there and whether the programs available in the UK can be used with them.

How many points do you need?

Now you have something/somewhere to aim for, it's time to check (roughly) how many airmiles you'll need to get there. Obviously, flight prices change all the time, so this does not need to be a precise figure, but you need a rough target to help you compare cards effectively.

What are you going to spend?

Credit cards offer airmiles to encourage us to spend, but how much do usually spend? Also, how much could you spend in the next three months, if you had to (you'll see why in a moment)?

Having considered the amount you're going to spend in the short and longer term, it's time to look at some cards.

Comparing airmile cards

Armed with the facts and figures needed to compare airmile cards, it's time to check a comparison table to see what's available. You narrowed down your choice of cards to only those flying to your desired destination (unless they all fly there), so now you can do some quick maths to see what you'll earn.

Annual fees

Different cards have different 'earn rates' (e.g. £1 spent equals x points), and the cards with the highest earn rates tend to charge an annual fee.

Fees can be avoided, and, if you're only looking to get something from your credit card for free, they should be (most card issuers offer fee-free alternatives to their fee-based products). However, if you are willing to pay a fee, you can super-charge the speed at which you earn rewards and, therefore, reach your desired location much quicker.

You'll need to decide, based on your own preference, whether your likely spend will warrant paying a fee, and whether you want to commit to spending that amount.

Bonus miles/rewards

Many airmile cards offer generous bonuses if you achieve a specified level of spend in the first three months, to encourage you to use your card. As with the earn rate of standard points, the bonus miles you will receive from paid cards tend to be considerably higher than those from free cards, but you'll often need to spend more too.

Remember bonus miles are only available during a short window of time, and the points they can generate can equate to many months of day-to-day spend. If you're unlikely to spend the amount required to get the bonus, delay your application until you are.

Interest rates

If you never miss a payment (and you should only get an airmile card if this is the case) then the interest you'll be charged is inconsequential, but it would be remiss to ignore the Representative APR altogether. No-one knows what the future will bring, and even one missed payment can result in high charges on a large balance.

Other benefits

Aside from reward points, some cards also offer additional benefits when you achieve certain spend levels. Perhaps, the most desirable of these is the 'companion voucher'.

Companion vouchers effectively enable you to double the value of your rewards, by allowing you to take a companion on the same flight (and in the same class) as you.