How Do Credit Card Points & Miles Work?

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Even though airline credit cards are becoming increasingly popular, many cardholders find them confusing. According to the J.D. Powers 2014 U.S. Credit Card Satisfaction Survey, about 43 percent of cardholders don't know if their cards carry an annual maximum points limit, 30 percent don't know when or if their points expire and 21 percent don't know if certain purchases earn extra rewards. If you share the confusion of these cardholders or just want to decide whether an airline card offer might be a good deal, it helps to understand the basics.


Requirements and Costs

Airline credit cards generally require an above average credit score to qualify. Although qualifying scores vary according to the issuing company, Credit Karma reports that on average you'll need a score of at least 650 and may need to score higher than 700 points. They also tend to charge higher interest rates, which can negate their airline mile benefits if you don't pay your balance in full each month. Many charge an annual fee after the first year. At the time of publication, the Capital One Venture card charges a $50 annual fee after the first year, while both the Chase Sapphire Preferred card and the United Mileage Plus cards charge $95 after the first year.


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How to Collect Points

Most cards offer bonus points to new cardholders if you spend a certain amount within the first 90 days or so. Typically, each point you earn is equivalent to one air mile. Not counting initial bonus points, how quickly you accumulate points may depend on what you buy. While a common ratio is one to two points for every dollar you spend, some cards allow two points for every purchase; others give you two points for travel and dining purchases and one point for everything else. Most also provide opportunities to earn extra points for certain purchases during special promotions.


Redemption Options

Some cards allow you to redeem points not only for airline tickets but also for hotel accommodations. Read the fine print in the terms and conditions, as each issuing company has its own rules about where, how and what you can redeem points for. In general, bank-issued cards are more flexible than airline-specific cards. For example, both Capital One and Chase Bank cards allow you to fly on any airline and stay in any hotel you wish, while the United Mileage Plus Explorer Credit Card only allows you to redeem miles with United Airlines and has no hotel booking option.


Things to Consider

Review inserts that come with your monthly statement, as terms and conditions can change at any time. Consumer expert Herb Weisman recommends that you review the terms for penalties, as late or missed payments can mean losing all the points accumulated during the month. Most reward cards limit the number of points you can redeem in each calendar year, according to Weisman. Verify whether you accumulate points automatically or need to opt in to qualify for points on purchases other than travel; with some cards, registration is a requirement.