Personally, I would STEE CLEAR of any "miles" reward program and here is why:

1. Bankruptcy - Haven't you noticed all the airlines going bankrupt these days. You think your miles will be around to use later on a specific airline which may or may not exist?

2. Limited Seats - It is no secret that redeeming miles is becoming more and more difficult. Typically you'll only find seat on inconvenient days (i.e. fly out Wednesday and come back Tuesday)

3. Inflation - I've noticed over the years the number of miles needed to redeem a flight keeps increasing over time. I remember when I could get an international seat from New York to Paris for 20,000 miles, now it costs 50,000. On rare occasion (i.e. middle of winter) you might be able to snag one for 25,000 miles.

4. Lower level of service - "FREE" Airline seats come with a dangerous detriment - getting bumped off the plane in favor of a PAYING customer or one of those "elite" customers. Additionally, I think if you pay for a seat you can get a refund if you are delayed for more than 2 hours. You get nothing if it's "free".

My suggestion would be to get a high cash reward card and save the cash back into a high yield saving account (ING, Emigrant, etc) then PAY for your tickets when you need them. At 1% cashback and 15k in charges each year you can expect $150/year.

If you plan on flying to Europe, British Airways periodically runs their specials where you can fly from various US cities to various European cities (London/Paris) for about $200+tax. You could also look for deals on Air France, AA, United etc.

Hmmm. If I were to get a cash-back card, as guest suggests, and receive $150/year for my efforts, that would result in $300 in cash every two years, which is the frequency of our overseas trips. The tickets typically cost between $800 and $1000 per person, and for a family of four, a $300 discount would be less than 10% of the total cost of the tickets.

I'd rather get a free ticket for just one of us, but your point about total miles required for overseas travel is very valid. A question that I need to ask about the credit card air miles programs is, is it one dollar spent = one mile accumulated? If that's the case, it might take at least three years to get enough miles to pay for a single round-trip, overseas ticket.

Maybe you can consider the citi premier: https://www.accountonline.com/ACQ/Chooser/LearnMore?siteId=CB&CARD_KEYS=4WTIW2C5-A

It doesn't lock you into an airline company and you can select when to travel.

I did browse the Citi credit cards website. They have about 30 different cards with various points/rates/fees/cash back options. One is partnered with American Airlines, but they also have a program called "Thank You points" which can be redeemed for "travel certificates". I'll need to look into the conditions closely; some of the Citi programs restrict what types of purchases qualify for points.

Alternatively, if you can cut 10% of your expenses off that $15,000 you spend each year then you can get $1500 (enough for two tickets) each year.

If it's unrealistic to cut back on spending then try to increase it by ensuring you pay for everything with your cashback card:

Cell phone, cable bill, electric bill, gas bill, insurance (auto/home/life), land line phone, etc.

Thanks, Guest, for the advice -- I am very aware of those costs and have pared a lot of them down already. I am actually planning a series of posts on reducing the costs of "subscriptions" that now seem to dominate our lives. I am not just talking about newspaper or Netflix subscriptions, but everything from cable TV to printer cartridges to utility bills. More on this tomorrow.

Like the first poster, I'm against airline mileage cards. The miles needed to get a free ticket are high, and it's been very difficult to get the tickets when we've had the miles.

So we've dropped our mileage cards in favor of cash reward cards. CitiBank and Chase both offer no fee cards that give you 5% cash back on grocery store, drug store and gas purchases, and 1% on other purchases (maximum $300 cash back in any year). There is also an AT&T branded card offered by CitiBank with the same features. So depending on the mix of your charges, you could earn up to $750 per year cash back on your $15,000 of charges. And cash is redeemable for most anything! My wife and I use those cards exclusively for the 5% items, and another 1.5% cashback/no limit card for everything else.

I have to concur with the Allen and the First poster.

The problems of Airline cards are many and were well enumerated by them. And Allen makes a great point about how combining 5% gas/grocery/drug cards with regular cash back cards you could get enough cash to almost buy a free airline ticket in 2 years anyway (I think his math is wrong as you would only get about 450 dollars in a year using the two cards).

Plus there is another huge drawback that was alluded to in the first post but maybe not made quite clear. Since airline cards have many restrictions on them you are basically locking yourself into a system that could reduce your options by a huge amount. Due to this the only options available to you may simply not work for you meaning you couldn't use the card at all or it may require you to leave on days or times of the day that require you to spend more money on lodging or other items. It also may be an extremely large inconvience as far as getting to the airport or meeting your relatives when you arrive or whatever the case me be. The point being there are other things to consider other than just price. Time and convenience are worth something and depending on how inconvenient they could be worth quite a bit, but see when you have that card in your hand that has 50,000 miles on it that you worked so hard to get you will do anything and put up with any inconvenience to use that card because you are not letting it go to waste. Its like the Seinfeld episode where Elaine has to get her sub card back and get her free sub even though she didn't like the subs but she ate so many subs and spent all that time to fill out that card that by golly she was going to get her free sub.

Airline cards are just a hassle all the way around and not the best value in the card business which is why most people are going away from them. With cash cards giving you such good options in the way that Allen lays it out, I really think its way more flexible to get a cash card and will give you way less headaches and who doesn't want less headaches anyway?

D-Man, Allen, and Guest,

Thanks so much for your advice about this. I really hadn't considered the cash-back option, because what I had heard about low cash-back rates, limits on which purchases count, and annual caps on how much you can get back. But as you pointed out, there are cards which have pretty good rates for things like groceries, which cost our family about $4,000 per year. I'll look into it more, and via Fidelity Observer let you know which programs are most appealing.

You should look into the Starwood Amex card. Yes it has an annual fee - BUT:
1. You get 1 starwood point for each dollar spent
2. You can convert starwood points on a 1 to 1 basis to many different airline miles
3. If you convert 20,000 starwood points to airline miles, they give you a bonus of 5000 miles in the process - So 20,000 points = 25,000 miles which is the equivalent of earning 1.25 miles per dollar spent.
4. Price matching guarantee up to $250 per item (yearly limit applies) - if you buy something (even online) and you find an ad in print within 60 days showing it for a lower price they will refund the difference to you.
5. If you spend enough they will waive the annual fee if you ask to speak to their retention department.
6. The starwood points are quite valuable at starwood hotels when used properly. 1 Night in a top Starwood hotel in NYC is 10,000 points, which would cost you out of pocket about $250

My math was based on using three cards: The Chase Rewards card, CitiBank's Dividend Platinum Select MasterCard, and an AT&T Universal Cash Rewards Card (also issued by CitiBank). If all $15,000 of FO's annual charges were at grocery stores, drug stores or gas stations, FO could get $750 back -- $300 on each of two cards and $150 from the third. I imagine the actual for FO would be less, as it's unlikely that all $15,000 falls into just those three categories. But every little bit helps! Personally, I like the flexibility of the cash. I have a lot of airline miles that I'm having a hard time using because of restrictions and limited seats. The cash is proving to be a lot more useful.

I have a couple of comments regarding earning miles. Mileage tickets (most of my experience has been with United) are both flexible and inflexible, depending on the situation.

I recently managed to get a United Mileage Plus standard award to India (cost me 80,000 miles) whereas a regular airline ticket would have cost me $1600 or so. BUT, I later found out that I couldn't change the dates on this ticket once I had flown to India. My only option was to buy a one way ticket back. With a regular ticket, you can make a change for $100. As someone else pointed out, as a "free" traveler, you are at the bottom of the totempole and thats not too good.

One advantage with a Mileage ticket is that you can make as many changes as you want BEFORE you fly. So, if you book a ticket and you don't fly, then you can rebook your ticket for the next available date. Ofcourse, the seats are extremely limited and you need to be flexible.

I have come to the conclusion that buying mileage tickets is not a practical use of your miles. A much better use of your miles is getting upgrades! If you are the type who pays to get an upgrade, then use of miles is definitely the way to go. I can typically get coast-to-coast upgrades for 10K miles each way and international upgrades for about 30K miles. This is an awesome deal compared to spending the extra amt for a biz class tkt. Once again, miles upgrades are not always available, but are way more plentiful than mileage awards.

I had earlier explored the option of going with a Citi Premier Pass card. Here is my analysis of that.

Analyzing Citi Premier Pass Elite

I looked into the Premier Pass Elite card in great detail and here is my summary.

Basic offer:
- $75 annual fee
- 1 spent mile for $1 spent
- 1 flyer mile for every mile flown with ticket purchased through their AGENT.
- free unlimited companion travel if primary ticket is > $359 (low season) or > $379 (high season)
- combine flyer miles and spent miles to obtain rewards (inclusive of travel tickets).
- 15,000 miles initial offer

Analysis:

- This would be an AWESOME deal just with the unlimited companion travel offer, IF you could purchase a ticket yourself (say online or through your own travel agent or directly via the Airline). Assuming that you take just one flight every year with family on flights costing $379 or more, you recover 4 years of annual fees on just one flight, in addition to earning flyer miles for every mile flown, on top of the miles got by booking the ticket, AND in addition to the regular frequent flyer miles of that airline - Amazing! However, there are serious caveats here which actually make this whole deal quite FISHY.

- The KEY caveat here is that one needs to purchase tickets through an agency called "Spirit incentives" (http://www.spirit-incentives.com). These folks are some sort of a vacation operator where they offer incentives to companies/groups. A quick google for "spirit incentives" shows several links where people are totally dissatisfied with their "offers". I tried calling them as well (866-553-2082) just to get an idea on how good their travel service and after 20 mins, I was still on hold! Now, thats fishy right here! So, my conclusion is that these folks are some sort of a "surplus" seat provider and not a regular travel agent! Which means that the chances of getting a seat to your destination on the date you want is pretty close to ZILCH. I would like to hear from folks who have actually used this agency to obtain free companion tickets to choice destinations.

- So, if you take away everything associated with Spirit incentives (companion offer, 1 flyer mile) and discard their worth, then this card is quite a bit worse off than others that offer you 1 flyer mile for every $ with no annual fee.

Just spotted an interesting news item about credit cards and the airline industry: Many of these credit card companies depend on the airlines for billions of dollars in charges every year, so have an interest in preventing them from going bankrupt. In some cases they are extending credit to troubled carriers, but at the same time are using their power to keep the airlines in line -- American Express reportedly held back something like $63 million in ticket payments to Northwest that had been charged on Amex cards. Northwest was forced to negotiate with American Express outside the bankruptcy court to work out an agreement with American Express to get some of the money. Goes to show that these airline/credit card relationships can get ugly, and potentially affect ordinary customers.

I did want to share with everyone one other thing about credit card rewards. Almost two years ago, I signed up for Upromise over at www.upromise.com. To make a long story short I'll give you a bit of background.

I charged about $70,000 in goods and services over 12 month period. The whopping addition to my Upromise account: $12.06

That is one crappy rate of return. At this rate, I would have to charge $7 million/year to earn $1200/year for my kids college fund. 1200/year x 10 years = $12000 (probably enough for one semester at the rate college costs are increasing)

I spent several weeks discussing this issue with Upromise and finally opted to simply close my account. It has now been 6 months and they have yet to cut me a check for the $12.06. When I inquired recently, they told me my account was never closed! This is after speaking with them REPEATEDLY about closing my account.

Of course, you can try for yourself. Call them up and tell them you want to close your account. I'd be suprised if you won't have to speak to at least two people and be given 1000 reasons why you shouldn't close your account before they actually do it (if ever).

Bottome line: Something is very fishy with this company. It wouldn't suprise me if some scandal or bankruptcy is on the radar for this group.

I don't always fly with the same airline so I got the Citi Premier Pass card about a year ago and I love it. Like you said, I get 1 point for every $1 I spend (2 points for gas and groceries!) plus 1 point for every mile I fly on any airline no matter how I buy the ticket. I buy tickets from travelocity, expedia, direct from the airline even a travel agent wherever I get the best price and I have earned flight points for every ticket when. I called Citi to confirm that I earn points for flying no matter how I buy the ticket and they said yes. Citi told me that the spirit piece only applies to getting the companion tickets -- they got me two tix to LA for $250. Also suggested I go to citipremierpass.citicards.com for more complete information. I think its a great deal.