It Doesn’t Cost Money to Earn Miles Anymore

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When the first airline credit card was introduced in 1986 (the Continental TravelBank Gold MasterCard from Marine Midland Bank, now HSBC) things were much simpler.

  • You earned one mile per dollar spent.
  • You paid an annual fee for the privilege of earning miles.

Early new cardmember bonuses were quite modest.

The Citibank American AAdvantage cards offered 5000 miles (2500 on approval and 2500 with first purchass) and had a $50 annual fee (waived for the first 6 months).

Continental’s card had just a $26 annual fee (also waived for 6 months). United’s card from First Chicago had a $45 annual fee (waived for a year) and didn’t offer miles as a bonus, but instead gave new cardmembers a $25 travel certificate to use with United or Westin, Hilton, or Hertz — which were all commonly owned at the time. The card also came with an upgrade certificate from each of the four travel companies.

Since then mileage-earning rates have gotten faster. Award costs have in many cases gone up. And annual fees have gone up too. Airline card cards mostly hover in the $95 per year range, which is roughly what $45 works out to today adjusting for inflation (using the CPI).

That makes sense if:

  • The card has a better value proposition than products which are less expensive
  • The customer spends enough on the card to make the fee worth it

No annual fee airline cards existed, often as downgrade products (“instead of cancelling because you don’t want a fee, we have this special card for you”) and commonly that card would earn less than one mile per dollar.

Increasingly over the past couple of years bank issuers have sought out the no annual fee market for airline cards. There’s been a lot of competition for rewards card signups, including from the banks themselves. So this is a new market to reach for growth.

American Express went there four years ago with their Everyday card offering a full transferable point per dollar spent.

Delta, United, and American all offer refreshed no annual fee card products. The United card offers travel credit, 1.5% back to spend with United (it’s hard to see why you wouldn’t prefer 2% back in cash from the Citi Double Cash).

The Blue Delta SkyMiles® Credit Card from American Express though has no annual fee, earns one full mile per dollar spent, and even 2 miles per dollar at US restaurants and on purchases made directly with Delta. And there’s an initial bonus of 10,000 miles after $500 in purchases on the card in the first 3 months from approval.

I like the American Airlines AAdvantage MileUp℠ Card as the best new entrant in this category. It offers 10,000 AAdvantage bonus miles and a $50 statement credit after spending $500 in purchases within the first three months after account opening.

Earning is 2 miles per dollar on American Airlines purchases and at grocery stores and 1 full mile per dollar everywhere else. This no annual fee card is one of the best card for grocery store spend earning a full two miles and not capping bonus earning in the category despite having no annual fee.

In essence I think the 3 reasons to consider the American Airlines AAdvantage MileUp℠ Card are:

  1. Grocery store earning. 2 miles per dollar at grocery stores and this is uncapped. Compare to the no annual fee Amex EveryDay® Credit Card from American Express which offers double points on US grocery store spend — but only on your first $6000 each year.

  2. Make money in year one. The card offers 10,000 AAdvantage bonus miles and a $50 statement credit after spending $500 in purchases within the first three months after account opening.

  3. You can still get other Citi AAdvantage cards. Citi usually lets you get only one bonus per card family, but you can get this card and also a Citi® / AAdvantage® Platinum Select® World Elite™ Mastercard® or Citi® / AAdvantage® Executive World Elite™ Mastercard® which has the best offer I’ve seen in a really long time, 75,000 miles after $7500 spend within the first 3 months of cardmembership.

    And you can still get their business card, too, the CitiBusiness® / AAdvantage® Platinum Select® World Mastercard® still has the best offer I’m aware of that they’ve ever made for the card, a 70,000 mile initial bonus after spending $4,000 within the first 4 months of account opening. This card has a $0 annual fee the first year (then $99).

Annual fee cards still make sense for most people spending a couple thousand dollars a month on credit cards. But for those who won’t pay an annual fee, or whose spend doesn’t justify a fee, it’s a richer time than ever to generate rewards.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I mist be misunderstanding this; it sounds like earning miles this way costs me the 2% I would normally earn with DoubleCash. How do I earn these miles without it costing me that 2% cash back?

  2. @Sam you never beat 2.5% cash back earning just one mile per dollar. Earning 2x or better you should. Which is why I generally recommend a portfolio approach to card spend

  3. Come on. Woke folk know MileUp is a ScrewUp. There exist better cards time to give better rewards at any amount of spend.

  4. @Ben
    This card costs less to earn miles due to lack of annual fee, not that it does not cost anything at all. It still costs 1 cpm minimum
    Even with bonuses, it costs money to get miles
    Even the best offer – 70k AA business card for 4k spend is costing us 80$ lost cash back for 74k miles = about 0.11 cents per mile

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