Many folks bite on the idea of the "frequent flyer miles" credit card, which promises to give you one frequent flyer mile for every dollar you spend on the credit card. Sometimes they double this, as a promotion, and sometimes they try to entice you with 5,000 free miles if you sign up for the card.
And in almost all cases, it is a really shitty deal. You end up with a gun-to-your-head interest rate, that will be triggered the moment you don't make a full payment every month. And yes, there is a bullet in the chamber. And just to make sure you really are financially dead, they'll put in a second round, if you miss a payment, which will jack your interest rate to 25% to 30% or more.
It is playing Russian Roulette, basically, all for the idea that you'll get a free airline flight - as if a free flight on an airplane these days was some sort of "treat", right? Some kid behind you kicking the seat, and breathing everyone else's farts for two and a half hours. Flying on an airplane sucks, so why view it as some sort of present? I certainly don't.
And the upshot is: It is highly unlikely you'll get anything other than an upgrade out of the deal.
1. To get a free flight, you generally need about 25,000 miles. And those miles "expire" in one or two years, if not used. So you'll need to charge $25,000 a YEAR on your credit card, just to get one free flight. That means, using that credit card for EVERYTHING you buy, in most cases, and also spending a lot of money. For most middle-class people, $25,000 in credit card spending is a lot. Even if you make $100,000 a year, chances are, most of that goes to taxes, mortgage, 401(k) savings, car payments, utilities, etc. If you are spending $25,000 a year on credit cards, chances are, you are over-spending and under-saving.
2. Every flight has very, very few "free miles" seats on it. So if you do get the miles, you have to book your flight way in advance. And chances are, you won't get two seats on the same flight. And to get two seats, well, you'd have to charge $50,000 a year (!!!) on that credit card. If charging $25,000 a year is hard, doing $50,000 is going to be damn near difficult.
3. In many cases, the helpful reps will offer to "sell" you additional miles to make up the difference for your "free" flight. You may end up spending as much as, if not more than, you would to just buy a discounted ticket, to buy miles for a "free" flight. Discount airline tickets can be as cheap as $99 and often are even cheaper than that. So what was the big deal about getting a free ticket? You dick around with twenty-five grand on a credit card to get a $99 flight? Where is the bargain in that?
The idea that you'll get a free trip to Hawaii (which requires far more than 25,000 miles!) is specious - and the idea that you'll take the whole family is basically impossible. At best, you might get an upgrade, provided you fly a lot.
When I used to fly coast to coast a lot, this is what I did. I accumulated a lot of miles quickly, and since I was flying solo, I could get a single seat "free" flight once in a while - like maybe once or twice a year. But mostly what I did was use my miles to "upgrade" to business class or first class for "free". It was very, very rare that I could arrange a free flight for myself, and nearly impossible to get a flight for two people.
So even for someone who flies a lot, the miles thing is a joke. And if you end up paying more for airfare on the pretext that you get miles, well, you are not being very astute.
Corporate fliers, of course, charge their company for the flights and keep the miles. And if they accumulate a LOT of miles in a short period of time, AND book well in advance, then yes, they may be able to get the fabled trip to Hawaii for the whole family. But these are very frequent fliers - the gold club or platinum club set, who fly nearly every week of the year.
For the rest of us who fly occasionally or even "often" the whole scheme ends up being a bad joke.
And if you get a credit card on the pretext that you will earn all these miles and get a "free flight" well, think again. Chances are, all you'll get is a really crappy credit card with a staggeringly high interest rate that could break you, financially, if you end up carrying a balance.
Airline miles are another example of fake financial acumen - an ancillary deal tacked on to the primary deal, in an attempt to distract people from what a rotten bargain they've made in the primary deal. People like to think they are being financially astute by chasing these sorts of deals, when in fact, they are just falling into an obvious marketing trap. And yes, there are folks out there who can tell you how many "airline miles" they have, but have no idea how much is in their 401(k), their bank account, or the balance on their credit card.
Is a free trip to Duluth really worth that risk? I don't think so. Screw the miles. They're a joke.
UPDATE: May, 2011: US Airways e-mails me this morning saying that my 88,000 frequent flyer miles will "expire" and my account will be closed unless I pay them $25 for the privilege:
Stay active and keep your miles! Keep the miles you've worked hard to earn. It's simple: Just log in to your account and pay $25 by 07-30-2011. Then, your account will remain active for another 18 months.
This is, of course, just annoying. But it illustrates the fallacy of frequent-flyer miles. If you don't fly, don't bother trying to accumulate them, as they will just expire over time. It is not like the olden days, where a person could travel on business for their whole career, and then retire with a million frequent flyer miles and spend their retirement jetting off to Paris and Rome.
No, today, you might get an upgrade to first class, or, if you fly a LOT, maybe you and the wife (but not the kids) can go to Hawaii once a year (then again, maybe not, redeeming frequent flyer miles is nearly impossible to do). But you can't "accumulate" miles over time.
We are flying to Ft. Lauderdale this fall to catch a cruise ship. Southwest has a direct flight for $79 each.
$79. Is that worth the hassle of frequent flyer miles? I think not.
Chasing after something that is "free" is a very dangerous thing to do, financially. Because in the pursuit of "free" you often end up spending more money.
If you pay a $25 to $50 redemption fee, is a "free" $79 ticket worth it? What if you have to pay $29 to check your luggage? Suppose you pay a $125 annual fee for the "miles" credit card? Or pay $500 in interest expenses.