Confused by the dozens of credit card choices available to you? Disregard all the touting that you see in ads — these are too general and not targeted to your specific mileage or points needs. Your choice must be specifically tailored to what’s best for you.

Choosing a credit card can be daunting. Advertisements gush about “earning free travel” and “5,000-mile bonuses.” If you were to believe everything you hear and read, you would probably be convinced that there are dozens of credit cards, all touting great, yet similar, rewards. Upon closer inspection, however, you would find that not all credit cards are created equal. Most will satisfy your basic desire to earn bonus miles and points with each purchase, but it is a very, very rare credit card indeed that meets all of your demands when it comes to flexibility, acceptance, benefits and fees.

This past year has seen more changes in the credit card industry than the previous 15 years combined. From the introduction of debit cards that earn miles and small business cards that offer much more than bonus miles to the double miles promotions and the recent change by American Express to introduce new cards with rewards built in, the changes to the credit card landscape have been sweeping. Not to mention the ever-growing trend of bonus “branding” (witness the new free nights promotion that Hyatt Gold Passport offers in conjunction with MasterCard). Consequently, there’s never been a better time to audit your wallet and make sure you have the best plastic.

One of the most basic decisions every mileage-earning credit card owner must make is whether or not to choose a no-fee card. The arguments for and against fee-based cards generally take the following form: For — fees are necessary to compensate for maintaining rich bonus mile offers; Against — no-fee cards save you money by eliminating unneeded expenses.

The other basic decision faced when selecting a credit card is which type to choose — one that has a direct relationship with the program of your choice, or a banked credit card that offers you a choice of redemption possibilities (American Express Membership Rewards and Diners Club Rewards are the best examples of this second type).

But that’s just the beginning. Choosing the right card is a matter of weighing all of the available features and determining a balance that works best for your unique circumstances. Let’s look at some options available to you, and some of the industry’s recent trends.

Charge Cards — Banks
The staple of business travelers, the American Express card, was actually a latecomer to the world of miles and points. When frequent flyer programs were born in the 80s, the venerable Amex struggled as card holders said goodbye to their old standby and jumped to Visa and MasterCard for their 1-to-1 miles to dollars programs.

Enter Membership Rewards. Originally call Membership Miles, the program we now know as Membership Rewards was launched in 1991. By 1995, the credit card magnate had joined forces with Hilton to offer a card, and the following year it branded itself with Sheraton. The original Sheraton card is now the Starwood Preferred card. The first Delta SkyMiles Amex card was introduced in 1996, and later that year American Express introduced a gold card. By 1999 it brought on the platinum.

“The biggest trend we are seeing is consumers today are looking for value in all of their spending and financial transactions,” American Express spokeswoman Monica Beaupre said. “People want to spend wisely and so they are absolutely looking for credit cards that give them value and membership. The reward, or point (or mile) has become a sort of a currency, if you will.”

To help draw new card holders and to keep others from jumping ship in this highly competitive arena, American Express now offers two Membership Rewards points for every dollar spent at most stores. American Express Platinum Card users will also get this perk beginning Nov. 1. The double “bank” for the buck is good on everyday purchases at most grocery stores (not the big box club stores), gasoline stations, the post office, home improvement stores and even when paying some of your monthly bills.

“People just want more value. They are buying these things everyday and getting something in return. They think this is good and they like it,” Beaupre said. “Credit card companies have to keep abreast of the changes and trends if they want to compete.”

Diners Club, the happy result of a misplaced wallet at a business meal in 1949, has, since its inception, focused exclusively on the business traveler. Its Club Rewards program, started in 1984, was the first relationship-marketing program in which members were both recognized and rewarded for their loyalty. Today, members may convert points into miles with all frequent flyer and hotel loyalty programs.

Diners Club is a six-time Freddie Award winner for best affinity card, largely because of its flexibility and double redemption rates with some airlines.
Annual fees for the card have been rising steadily, to the chagrin of many members. Still, the customer loyalty to this (relatively) humble card is simply astounding. And now even Diners has evolved, offering a new Montage card with a revolving balance, as well as its traditional charge card.

While Diners Club Rewards invented the idea of a credit card ‘bank,’ allowing members to choose which frequent flyer program to convert their spending rewards into, both Club Rewards and American Express Membership Rewards get plenty of competition these days from hotel credit cards that allow a similar banking choice. Prominent among these are the Starwood Preferred Guest American Express card which has become the ‘hip’ choice among frequent flyer insiders — providing flexibility at a low (how’s free for the first year) annual fee.

Non-Affinity Cards
Some of you may remember our look at non-affinity cards from our November 1999 issue. For those who don’t, here’s our advice in a nutshell: Be careful. The value of miles earned on non-affinity cards is limited to the rewards offered by the credit card company itself — in other words, they are not transferable to any airline or hotel program, and as a result, cannot be pooled with miles earned by flying and generally cannot be used for upgrades. Familiar among these type of cards are those issued by Capital One, Wells Fargo, MBNA and even Citibank.

Another drawback to these types of cards is that most of these programs place a cap on what they’re willing to spend on free tickets. If the cost of a ticket exceeds their $500 cap, you may have to pick up the difference. Of course, many of these cards have no annual fee, which seems attractive on the surface. But again, the difference between their cap and the cost of the ticket may easily be larger than the annual fee for a true affinity card.

Finally, if you, like most hardcore frequent flyers, prefer upgrades and the perks associated with elite-status, you’re simply better off with a true frequent flyer or hotel rewards affinity card.

Debit Cards
Debit cards are a sound alternative for the consumer who either cannot qualify for a credit card or chooses to avoid using a credit card. The debit card bears a Visa or MasterCard logo and offers its holder the convenience of a credit card. Of course, the debit card subtracts money from your checking account and, therefore, allows you to spend only what you already have.

In 2001, financial institutions issued 157.9 million MasterCard and Visa debit cards, up from 135.8 million in 2000. With the staggering growth came market pressures, and with market pressures came rewards.

Continental partnered with Chase in 1999 to offer the first co-branded affinity debit card. Since then, the offers have come fast and furiously, and today there are at least 10 from which to choose. Alaska Airlines, American, Continental, Northwest and US Airways each offer at least one version.

Before jumping on the affinity debit card bandwagon, you must have an account with the issuing bank. You’ll want to know if that bank is appropriate for your needs. Are its terms and conditions acceptable? Are there local branches? And is it worth jumping through the appropriate hoops to start yet another checking account?

The most tangible drawback in terms of earning ability is that debit cards generally earn about half the miles of a credit card. Unless you’re willing to pay extra fees for a “premium” classification, you can expect to earn one mile for every two dollars spent. The Premium Citibank AA Debit card and the Chase Debit Preferred and Business cards all offer a full mile per dollar spent, but they’ll also set you back $65 a year in fees, not unlike a normal credit card.

Consider: If you spend $5,000 a year on your debit card and the base level of a flight award is 25,000 miles, it will take you 10 years to earn a free ticket. By that time, you’ll have paid $25 to $30 a year and that “free” ticket will have quietly cost you $250 to $300 dollars. However, most people using a debit card see it as the equivalent of writing a check and if you can earn miles for writing a check, you’re way ahead of the game.

Obviously, by itself, this hardly seems to be a deal. But if you’re earning miles by flying or other activities, the debit card may be just the thing to pad your mileage account.

Business Cards
With an eye toward the heavy spending potential of small-business owners, a number of banks have issued business cards specifically geared to that market.

“Clearly we want to increase the spend, just like the user wants to increase the rewards,” said Tom Kelly, a Chicago spokesman for Bank One.

Of course, to get a business card you’ll need to qualify. Most programs restrict membership to business owners with sales and employees under a set amount.

The real advantage here is that you are given the option of earning miles individually, or as a company. In other words, you may opt to have the employee cardholder bank miles into his or her own account, or choose to have all miles on the account pooled into a single mileage account. Mileage Plus, for example, recently released its Platinum Business Visa, which allows for separate or collective pooling of miles, and double miles on UAL purchases.

“It’s clearly an attractive reward, so we’re building on that platform, for products geared toward the heavy users,” Kelly said. And Mileage Plus isn’t alone. Alaska, America West, American, Continental, Delta, Northwest, US Airways and Six Continents Priority Club all offer business card options, generally with higher fees and interest rates, but with rich enrollment bonuses and high earning power.

Fee-Free Cards
Be wary of the temptations of “fee-free” cards. They have their benefits, but unless you’re careful you’ll spend a heck of a lot more on interest than any potential fee.

Take, for instance, a promotion being sent to select Northwest WorldPerks members. The deal states: “If you apply by the end of the month for the no annual fee card, you’ll get a 3,000-mile enrollment bonus. And the first time you use the card for qualifying purchases, you’ll get an additional 2,000 miles.”

So now we’re up to a minimum of 5,000 miles for signing up and charging, oh, let’s say, a tank of gasoline — with a 1-to-2 miles to dollars ratio. Sounds great, and upon further inspection it appears to get even better. The deal also states that “If you charge $2,000 on this new card by the end of December, you’ll earn another 2,000 miles.” Add that to the 1,000 miles you would get for making $2,000 in charges and you are up to 8,000 miles just for singing up, or roughly a third of your way to earning a free domestic ticket.

But before you break out the bubbly, you’ll want to be sure you can pay off that $2,000 and odd change you’ve racked up right away. This particular card offers an interest rate of 9.75 plus prime, currently 4.5 percent. At this APR it doesn’t take Alan Greenspan to see that, if you’re not careful, you could end up paying more in interest than you would have paid for the ticket itself.

Other Trends
Larger signup bonuses — In years past, the First USA Visa card from United Mileage Plus offered the typical 3,000-5,000 bonus miles for signups. But they and many others are getting very aggressive and now offer 15,000 bonus miles.

Anniversary bonuses — It used to be that this very nice compliment was only offered by the Alaska Mileage Plan credit card, but now you’ll find thousands of extra bonus miles come your way each and every year you continue with a card.

Free companion tickets — First introduced years ago by the American AAdvantage credit card, this feature is fast becoming a standard. Many savvy frequent flyers bank on this one benefit to save them money, since it no longer requires that you purchase a full-fare ticket to take along someone for free. The newer offers include most discount fare classes.

Elite benefits — That’s right, choose the right card and earn basic elite level benefits. While you’re not likely going to be at the Platinum level, just knowing you have an elite membership will often make award redemption easier for you. Both credit cards sponsored by the Hilton HHonors program come with Silver elite membership.

Spending bonus — There’s nothing more competitive today than an offer of bonus miles and points with a select set of merchants. Continental has double mile bonuses when cardholders use their Signature Visa or Platinum Visa or MasterCard at Lowe’s Home Improvement Warehouse, CVS/pharmacy, AT&T, Hertz, Macy’s, Bed Bath and Beyond, KB Toys, U.S. Postal Service, Best Buy and any bookstore. The addition of any bookstore is likely to be the next battle ground and, of course, Delta is most famous for double miles at similar merchants and for double and even triple miles for purchases during the weekend.

Partner bonuses — Earlier this year, the American AAdvantage Citibank card awarded cardholders a special 7,500-mile bonus for spending with a variety of AAdvantage partners.

Special benefits — There’s no better example of this than the American AAdvantage Citibank card. They have established a special award chart for cardholders entitling them to awards for only 20,000 miles. Granted only select cities apply and those cities change each quarter, but we have found this benefit to be one of the most valuable benefits of any card.

And finally, the most exciting new trend in many years — Credit card miles and points that count toward elite status. A few years back, the credit card for US Airways offered such a benefit, but the benefit was pulled after only one year. Well, it’s back. The new Platinum Business American Express card from Delta counts up to 10,000 miles earned from purchases toward re-qualification for elite. At $135 per year, the card is not inexpensive, however, when you consider that you won’t have to make any late-year mileage runs to Singapore to re-qualify for Medallion, it’s really cheap.

What’s Right For You?
The variety in affinity credit cards is enormous and is probably only matched by the diversity of frequent flyers. Your search for just the right card begins with a little self-examination: What kind of flyer are you?

The inveterate road warrior, who flies so often that you’ve forgotten that most toilets don’t flush blue? Or are you a Joe or Jane average, chained to the surly bonds of earth until that free ticket to the Bahamas comes through?

We spoke with some seasoned veterans of the credit card-miles game for their perspectives.

“I put as much as I can on credit card; I use Diners as much as possible,” says computer consultant and frequent traveler, 29-year-old Roger Lee of Dallas. But unlike 94 million other credit card holders in the U.S., Lee doesn’t carry a monthly balance.

Lee is partial to the Diners Club card because of the double redemption rate with British Airways: A simple half a tank of gas at $10 will get him 20 British Airways miles. Lee didn’t venture in the foray of charging for miles until about five years ago. His first card was with American Express for the Membership Rewards. He had one for personal use as well as a corporate card that he pooled into one account. He later opted to use Diners almost exclusively, and cancelled his American Express Platinum card because of fees.

To date, Lee has accumulated 2.4 million miles with three different programs. He estimated that about a fifth of the miles have been from using his credit card.

Casey Lanson’s odyssey into charging for miles began in 1994 when he charged a tank of gasoline on his Visa card. From that point, “The light sort of went on,” he says. Today the 59-year-old partner in a Tampa computer consulting business has some 11 million miles and points, largely for opting to pay with plastic over paper. Lanson has the system down, and calls collecting miles one of his hobbies.

“I consider it my travel 401K,” he says.

In the past four years, Lanson has charged two cars and a van so that he could earn miles and points for the $92,000 in vehicle purchases. Many car salesmen will try to steer the customer away from making such an exorbitant purchase on plastic, but as Lanson can attest, it can be done.

When Lanson charged a $56,000 Lexis four years ago, he bypassed the salesmen and went straight to the top to explain why he wanted to charge the luxury vehicle.

“I ended up with 56,000 AAdvantage Miles,” says Lanson.

Many dealers are leery of such transactions because of buyer-remorse rules that could leave the dealer out cold if the credit card company sides with the customer and stops payment for one reason or another. To be successful at charging for miles, Lanson says it must be a way of life. “You have to become almost a zealot.”

Lanson says many business owners have no idea of the miles and point earning potential that is out there, and he encourages those that seek his advice to double check with suppliers — anyone who is generally paid in cash — to see if they will take credit. Lanson also encourages people who can’t pay off their credit card bills in full each month to play it safe and not get caught up in the mile and point charging frenzy.

“Interest will kill you,” he says. “Go and buy the miles from the airlines — you’d be better off.”

Your own habits will determine the type of card that works for you. To assist your decision, let’s draw some generalizations — four profiles, if you will, which more or less cover the gamut.

The high-spending, high mileage type — Bill Gates meets Gulliver. These folks spend a great deal every year on travel. Whether it’s on their own dime or a generous company expense account, they rack up the bills. A high annual fee is usually not a problem here, largely because the mileage earned inevitably makes up for any outlay. For this type of traveler, earning caps are out — they’re ridiculous anyway. And since this traveler spends a lot of time and money on planes, it only makes sense to go with a program that gives you double miles on purchases made with the airline.

Most folks in this category have become obsessively good about paying off their balances in full every month, so interest rates are less of an issue. Almost any Platinum-level American Express card will fit the bill. Delta’s has the best enrollment incentive, offering a 15,000-mile bonus as well as double miles on ticket purchases. But don’t sell short the Diners Club card because, with an enrollment bonus of 12,000 miles plus all your options and cardmember benefits such as their Club Rewards Concierge, we’re talking the complete deal here.

If you do carry a balance, and interest rates become a concern, America West carries the FlightFund Visa Platinum: Double miles on ticket purchases, with an interest rate of just 11.74 percent. Priority Club’s Rewards Platinum Visa matches that rate (after a six-month period of just 2.9 percent) and may be more convenient for those outside the America West network.

The frugal traveler — These are folks who, by necessity, find themselves in the air often, but are watching every penny. The vast majority of this flyer’s mileage will be earned by traveling — a credit card will simply serve to pad the account.

This flyer needs maximum earning potential on travel purchases, and no earning cap. High annual fees are a concern here, as are high interest rates. When cash flow is limited, paying off the balance every month isn’t always possible, so many of these consumers are going to carry some revolving debt. Translation: watch the interest rates.

If interest rates are your sole criterion, the best ones out there in the non-platinum categories are the Alaska Mileage Plan Visa Gold at 11.74 percent; the Southwest Rapid Rewards Classic Visa at 13.4 percent and the Hilton HHonors Visa Signature at 12.74 percent (after a six-month period of 0 percent).

Naturally, the first two won’t help you much if you’re outside those carriers’ geographical networks. And the HHonors points to miles ratio (3:1) is hardly the most generous in the industry.

The high-spending earth-dweller — Either through good fortune or good business, this flyer deals with hefty credit card bills every month, but just doesn’t get off the ground that often. A free trip to Bermuda would be nice, but travel isn’t necessarily a priority.

Like most big spenders, these folks usually pay off their balances every month, so either charge or credit cards are feasible. And if you’re spending big, you don’t necessarily want to be limited in your earnings, so once again, caps are out. You’re also going to be on the lookout for programs that have multiple partners to increase your spending options. The American Express Membership Rewards program is great for this. Airline, retail and other partners are all vying for your points.

Joe six-pack — Earthbound in more ways than one. Expense report is not necessarily a part of your vocabulary. Still, you’ve got your eye on a trip to Ireland and wouldn’t mind doing it for free. You don’t foresee charging a new Maserati to a card, but you do buy gas and groceries now and then.

You want a low interest rate, a low annual fee and you feel no real need to earn double points on airline purchases because, frankly, you won’t be making many. Earning caps are not a problem and a high enrollment bonus would be nice.

Take a look at the United Mileage Plus Visa: It has a cap of 60,000 miles a year, but it does offer 15,000 bonus miles right off the top. It carries an interest rate of 14.65 percent — right about average for an affinity card. And Visa seems to be accepted more widely than American Express, though that gap is closing daily. If you feel comfortable with the acceptance rate of American Express in your daily routine, you could do much worse than the new Amex Green and Gold Rewards cards. With options like double points at grocery stores and gas stations, you may find that your earnings add up quickly. These cards are quite specifically designed for different types of consumers — if travel is your bag, go with the Preferred Rewards card. If merchandise is your goal, the standard Rewards card should suffice.

Of course, not everyone follows a set pattern. Is there a solid, all-purpose card out there?

If you listen to FlyerTalkers (and you probably should), there is. It’s the Starwood Preferred Guest American Express Card. It nets you 1,000 points for your first stay and 500 points thereafter. It offers one Starpoint for every dollar spent. There is no cap. And unlike their regular charge card, this co-branded baby allows you to carry a balance, if you wish. The secret to this card is the point to miles conversion if you spend big. Spend $20,000 annually and you’ll be able to convert that into 25,000 frequent flyer miles of almost any type.

To keep your bases covered, though, you may want to consider a Visa or MasterCard in addition to a charge card. To that end, an enormously popular card with frequent flyers, and something of a dark horse in its relative anonymity, is the Amtrak Guest Rewards card. There is no annual fee, it offers one-to-one credit on United, Continental and Midwest Express, there is a 25-day grace period and a relatively low interest rate of 12.99 percent. The only caveat is that miles will expire in three years if you don’t book on Amtrak, but you can get around that by transferring the miles into your non-expiring frequent flyer account.

A Word (or Two) of Warning
We’d be remiss not to mention some downsides. Even if you’re the most responsible spender on earth, there are restrictions that can sneak up on you.

For starters, look at spending or earning caps. You may be ready to spend the farm in a month to earn miles, only to find that your card maxes out at 10,000 miles a month. Or you’ve waited patiently for months for a double or even triple miles promotion, only to find that the minute you reach 30,000 miles the party’s over.

And then there’s you tumbleweeds who stay with a card only as long as it takes to get the enrollment bonus, then switch. Unless you do this right, you’re going to end up hurting your credit rating. Every time you apply for a card, the issuer will make an inquiry about your credit status. An inquiry will remain on your record for a year and issuers will become concerned if they see an unusually high number of inquiries on your report. More than 10 inquiries in a six-month period makes them think you’re desperate for credit, and therefore a high risk.

Beware also of the deadly lure to transfer balances from other accounts. Depending on your card of choice, this can either be great or a disaster — even when earning miles for it. Some cards will allow you to transfer existing balances from other cards and earn either one mile for each dollar transferred (with limits) or one mile for every two dollars you transfer. It’s easy and they even supply a ‘convenience’ check for you to use. Here’s the problem; these are usually considered cash advances and carry a very high premium. Paying the extra interest rate and fees may just make these the most expensive miles you have. Before doing this check to make sure it’s financially a good deal for you.

And perhaps most importantly, don’t let the lure of “free” miles get you in over your head.

“People go to extremes to earn air miles — they are some of the most popular cards,” says Daniel Ray, editor-in-chief of Bankrate.com, an Internet clearing house of information on financial rates and services.

From college tuition to taxes, the public has bought into this notion of getting more bang for the buck…er…charge. But Ray cautions that there is always the potential for disaster when making high credit card purchases. Despite, and in some cases because of, a tanking economy, consumers are not holding back when it comes to putting it on plastic. Analysts say the American public’s total indebtedness by the end of last year stood at $1.65 trillion.

A Final Word
In the final analysis, your choice is going to come down to just that — your choice. The variety of credit card options is so large that even once you narrow your priorities to interest rate, or earning ability, or any one of the numerous variables in the credit card game, you’ll still be left with more than one choice. For every new development or incentive in this particular card game — for every low fee, mileage bonus, or nifty logo — the market is competitive enough that dozens more similar developments or incentives are sure to follow.

And, just as with restaurants, airlines or hotels, much of your future behavior will be based on intangibles — most specifically the customer service you receive. For every user who swears by a particular card, you’re bound to find one who cancelled the same card for a perceived slight from a service department. Perhaps early in your career financial struggles with a particular card clouded your vision. Or perhaps a computer glitch led to an embarrassing decline. Who knows? Look at your options, make a choice and see how you’re treated.

In the end, that’s what’s most important.

See our Credit Card comparison chart to find out more about which card is best for your specific needs.