Vast Variation in Credit Card Air Mileage Rewards with Restrictions Attached – Consumers Urged to Choose with Care

Earning air mileage rewards for free flight travel through credit card spending becomes very popular among consumers.  Many card issuers have capitalized on this consumer desire by offering to launch a variety of flight awards, and teaming up with airlines or air mileage operators for co-branded credit cards, promising more mileage benefits for credit card bonus points.  But a recent Consumer Council survey on 53 credit cards has revealed a vast discrepancy, from one reward plan to another, in conversion for air mileage. 

 

In addition, some co-branded credit cards in certain circumstances were found to actually offer less favourable reward terms, sometimes even required more spending than the ordinary credit cards.  There were also restrictions attached to some transactions that were not entitled to mileage awards; and some cards would require annual or conversion handling fees. Consumers should therefore read carefully the terms and conditions for comparison.  And never overspend with your credit cards for the sake of earning flight rewards. 

 

In the survey, the Council compared 16 issuers offering 53 credit cards, including 9 co-branded with airlines or air mileage companies. In the case of a popular mileage reward plan in the market, for instance, cards issued by the same card issuer may offer different reward programs. The local spending required for conversion per air mile could range from $2.78 to $25, a difference of nearly eightfold.  For example, a Hong Kong/Osaka economy class return air ticket in the plan requires a mileage of 30,000, which means in order to redeem that very ticket a cardholder has to spend an amount anything from a minimum $83,400 to a maximum $750,000. 

 

Furthermore, consumers should take note of the variance in the mileage requirements of different reward plans for ticket redemption to the same destination abroad.  For instance, the Hong Kong/Osaka economy class return flight, the mileage required could vary from 20,000 points to as much as 50,000 points.  Coupled with the difference in mileage conversion rates, consumers in possession of several credit cards should pay extra attention in deciding which one to use.

 

Though co-branded credit cards are issued by card issuers jointly with airlines or air mileage companies, they do not necessarily offer a better conversion deal.  Using the same popular mileage plan example above mentioned, one ordinary credit card requires only $3 per air mile for overseas or foreign currency transactions. For another credit card, if the transactions meet with certain special requirements, for instance, specific dates or types of merchants, the conversion of an ordinary credit card can go further down to $1.88 per air mile.  In both cases they are cheaper than the co-branded credit cards of $4 per air mile.

 

In general, overseas card transactions will gain you more mileage rewards than local spendings.    Among the credit cards surveyed, 14 will offer more favourable rate in overseas or foreign currency transactions.  On the basis of the same plan aforementioned, overseas transactions needs only $4 to $5.33 to convert to one air mile whereas for local transactions the conversion is between $6 and $8.  But cardholders travelling abroad should note that some card issuers would not give flight awards to overseas transactions serviced by Dynamic Currency Conversion (DCC) nor transactions based on Hong Kong currency.  

 

In respect of charges, 21 credit cards in the survey levy no conversion handling fee while some cards charge a set $100 to $300, and some card issuers charge $10 per 1,000 mile conversion.  Credit cards generally charge an annual fee depending on the card issuers and the type of cards used.   Some credit cards are permanently annual fee free while some will waive the fee when the transactions have reached a certain amount.

 

The Consumer Council has this advice to consumers: do not for reasons of air mileage conversion get into reckless overspending.  For even if you successfully get the ticket(s) you want, you may be heavily in debt, and stand to lose out in the end.  Consumers wishing to earn flight awards from credit card transactions are advised to take note of the following: