How much does that free ticket cost?

06-26-2005

A widening variety of credit cards operate reward programs that offer users rebates in the form of free airline tickets and other travel elements, such as hotel stays and rental cars. Although these cards often entail annual fees and somewhat higher interest rates than cards without these incentives, the allure of a free airline trip can be significant, especially for people who don't carry balances from month to month.

But there are major differences in these cards, and it's important to understand them and choose the type of card that makes the most sense for your particular situation, financial needs and travel habits.

Airline-affiliated cards

Every airline these days offers an affiliated credit card that lets users accrue mileage credits, usually at the rate of one per dollar charged on the card, along with a menu of special bonus deals. These credits are deposited to the user's frequent-flier program account to be used as if they had been earned actually flying on that airline. There's the US Airways Bank of America Visa, Citibank AAdvantage Master Card, and Delta SkyMiles American Express. The idea is to concentrate as much spending on one of these accounts to pump up your mileage account on that airline, presumably one you're likely to use every now and then.

The idea of these programs is good, but the reality can be otherwise. While these credit card programs can certainly add to your mileage pool, many travelers are discovering that actually getting a free ticket or tickets where and when they want can be problematic, if not downright impossible.

This is because most major carriers allocate only a small percentage of seats on any given flight for frequent-flier freebies, and once that inventory is gone, it's gone. What's worse, since airlines don't make that percentage public, there's never any way to know what your chances of scoring a free seat might be. Several carriers do offer the option of getting a free ticket from the general seat allotment, but for double the normal mileage.

With the drastic reduction in flights from Pittsburgh over the last year, this seat shortage has been exacerbated. Fewer planes mean fewer available free seats.

Because free seats can be hard to get, many travelers have been using their mileage to upgrade reservations for seats they have purchased, but even this is getting difficult. (Exceptions to this rule are the budget carriers -- Southwest Rapid Rewards, AirTran A+ Rewards and Independence Airlines iClub, which let passengers who have earned flights have any available seat on the plane, with no blackout dates or hassles.)

Another potential hitch is that your mileage account is entirely dependent on the financial surety of the carrier in question, no small consideration in these days of bankrupt airlines.

Multi-airline programs

Then there are credit card programs that let users accrue credits that can be traded in for "free" flights on a range of carriers.

These include a variety of Visa and MasterCard programs. Local banks offering accounts like this include National City's First Air, PNC's WorldPoints and Citizen's Circle Rewards. National banks offering free flight programs include Chase Travel Rewards, BankOne TravelPlus and American Express Gold Plus,

These reward programs advertise that they let participants accumulate points (generally at the rate of one for every dollar charged on the card) which can be used to book seats on a wide variety of airlines with no blackout dates.

That is true, but with significant qualifications.

Since seats for these programs are purchased by the issuing bank rather than drawn from the airline's small allotment of free seats, reservations are somewhat easier to get, although these bookings are still subject to normal availability on any given plane. (One exception is American Express, which offers free seats on a variety of airlines, but they are drawn out of the airline's own frequent-flier allotment, which, as explained, makes them more problematic to get.)

The primary drawbacks with these programs are stipulations that limit redemptions. Reservations must be for round-trips only, and they must include a Saturday night and be made at least three weeks prior to departure. These factors greatly reduce the flexibility and use of these "free" tickets.

All of these programs also set maximum values for each ticket redemption level (i.e. $400 for the 25,000 point domestic flight, $800 for 50,000 point international level). If the actual cost of the ticket winds up being higher than that, the passenger must pay the difference, along with all taxes and other fees.

Unfortunately, $400 doesn't buy as many tickets these days, nor will it get you anywhere you want in the country even with a three-week advance purchase and Saturday night stay. Also, all reservations must be booked through one designated vendor, who may also tack on a transaction fee and handling charges.

But these programs do at least give you a shot at getting one or more free tickets on flights to popular destinations when you want to go. With these programs, you can get as many seats as you have credits for and are available. Furthermore, because the ticket is purchased rather than a frequent-flier freebie, you have more recourse if any changes or interruptions occur before or during your trip.

Capital One Bank has introduced a new wrinkle to this type of credit card program with its No Hassle Miles Ultra MasterCard.

This card, which comes with no annual fee, allows users to reserve virtually any seat they want, any time, on any carrier for domestic or international travel, with no blackout dates, advance purchase requirements or Saturday night stays. Another advantage is that ticket can be booked any way you want, through any travel agency, airline or online service. There are no limits on the cost of the ticket or how many seats can be bought, assuming, of course, that you have amassed sufficient mileage credits.

The mileage necessary for any ticket is determined by multiplying the price by a factor which, depending on the card holder's credit worthiness, ranges from 100 down to 80.

Thus, using the 80 multiplier, a ticket priced at $150 would require 12,000 points, a $312 ticket 24,960 points, and an $800 ticket, 64,000 points. You simply book the ticket/s, pay with the MasterCard, then notify Capital One, which deducts the mileage from your account and credits your statement for the full price of the ticket, including all fees and taxes.

This proprietary formula certainly provides for greater convenience and ease of use, but depending on the cost of the tickets you chose, it might cost more mileage than other programs. Or less.

For example, while a domestic ticket $400 maximum value would be 25,000 miles on most of these multi-airline programs, it would take 32,000 miles on Capital One. Or more if your conversion ratio is higher than 80 to 1.

Thus, any round-trip domestic ticket over $312 would cost more miles with Capital One, while less expensive tickets would require fewer miles. A $150 ticket would be 12,000 miles, instead of 25,000 with the other programs.

Another consideration is that with almost all of these secondary programs, accrued mileage expires after a time, which can range from two to four years. None of these schemes will do you any good if you don't amass enough mileage to use within that time, although several offer other redemption options, such free merchandise and cash back.

Obviously many considerations other than travel rebates should go into the decision about which credit card program makes the most sense. These travel offers can be very enticing, but above all, be sure you'll actually be able to use of the awards they promote. Don't get suckered into participating in a frustrating game of bait and switch.

For a selection of credit card programs with travel rebates, visit www.creditcardguide.com/airmiles.html.

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