Top 10 Loyalty Credit Cards

Voters during the 2013 Freddie Awards chose these cards as the best.

Which came first, loyalty programs or co-branded credit cards? Of course, we know the answer to that question, but the question of which drives loyalty, the credit card or the loyalty program itself is less clear. Bram Hechtkopf, Vice President, Business Development & Marketing at Kobie Marketing, says that co-branded credit cards “have been the backbone of the industry for some time now as they are very popular with consumers.”

The relationship between an issuing bank and its partner airline program is key, however, and in our 60 Seconds interview in this issue, Senior Manager of Rapid Rewards Partnerships, Anissa Reil, says, “the backbone to any successful rewards card is a great loyalty program.” The loyalty program has to provide value to give the member a reason to want to earn their currency in the first place. 

In our online poll at WebFlyer.com, we asked members what percentage of their miles/points were earned from credit card usage. The majority of respondents said that over half of their miles/points were earned from credit cards and 35.3 percent said they earned more than 70 percent with credit cards. Airline credit cards were more popular with 50 percent saying if they could choose only one credit card, they would go with a co-branded credit card earning miles in a frequent flyer program compared to 15 percent who would choose a co-branded card earning points in a hotel loyalty program.

Clearly, members are racking up a lot of miles and points with their co-branded plastic. We took a look at the airline and hotel loyalty credit cards that ranked in the Top 10 in the 2013 Freddie Awards. While many card benefits are similar, there are features unique to each card. The credit cards of the legacy carriers include free checked bags and priority airport benefits while Alaska offers a companion ticket and Southwest gives anniversary bonus points and access to additional types of awards. All of the credit cards offer exclusive benefits to their cardholders beyond simply being able to earn miles or points for purchases.

Southwest Airlines Rapid Rewards Credit Card 

Earning

The card earns two points for every $1 spent on Southwest Airlines, AirTran and Rapid Rewards hotel and car rental partners. Cardholders earn one point per $1 spent on all other purchases and balance transfers made within the first 90 days of account opening (up to $10,000).

Benefits

Premier cardholders earn 6,000 points each year on their anniversary, which is worth $100 toward a Wanna Get Away fare and compensates for the $99 annual fee. Members can redeem points for More Rewards, which include flights on other airlines, hotels, gift cards, car rentals and some merchandise awards. Foreign transaction fees are waived for Premier cardholders and they can earn 1,500 tier-qualifying points for every $10,000 spent, up to 15,000 tier-qualifying points.

Why people like it

Under the old Rapid Rewards program, members could only redeem for flights on Southwest Airlines, but with the re-launch, Rapid Rewards card-carrying members can redeem for non-flight awards and flights to international destinations on other airlines. Redeem your 6,000 bonus points for a Wanna Get Away award ticket each year and the card basically pays for itself. And cardholders earn double points, not only on Southwest Airlines, but also with hotel and car rental partners.

All points earned from spending on the Rapid Rewards credit card, including sign-up bonuses, count towards the 110,000 points needed to qualify for a Companion Pass. Southwest periodically offers 50,000 bonus points each for both the personal and business credit cards, which allows members to earn 100,000 points relatively easily in a short period of time. Members who then earn an additional 10,000 points can take advantage of being able to bring a companion along for free on all flights, including award flights. The Companion Pass is one of the best perks offered to frequent flyers and acquiring the credit card can help members qualify to earn the pass. We can’t say for certain whether points earned from credit card spending will continue to be eligible for the Companion Pass requirement, but for now, the credit card offers a fast track to qualifying for two-for-one flights.

Citi Platinum Select / AAdvantage Visa Signature Card 

Earning

Cardmembers earn one mile per $1 spent on purchases and double points on American Airlines purchases.

Benefits

Citi Platinum Select cardmembers receive a complimentary first checked bag for the member and up to four traveling companions, priority boarding, 25 percent discount on eligible in-flight purchases, $100 American Airlines flight discount each year you spend $30,000 in purchases and a 10 percent rebate of redeemed AAdvantage miles, up to 10,000 miles each calendar year. The annual fee is waived the first year. Cardmembers can also book Reduced Mileage Awards for 7,500 fewer miles to a limited number of travel destinations in the U.S. and Canada that change each quarter. 

Why people like it

While the quarterly discounted awards have been around for awhile, American AAdvantage added the first free checked bag, priority boarding and 10 percent rebate as new benefits to the credit card last year. Elite members already receive early boarding and free checked bags, but receiving a rebate on redeemed miles means members can save up to 10,000 miles each year on award tickets, which makes up for the $95 annual fee.

The discounted Citi awards are restricted to destinations in North America, but a roundtrip award ticket for 17,500 miles in coach or 42,500 miles in business is a good deal compared to the industry standard of 25,000 miles in coach and 50,000 miles in business.

Avianca LifeMiles CITI Visa Infinite

Earning

Cardholders earn one mile per $1 spent and two miles per $1 spent on Avianca or TACA. 

Benefits

Cardholders receive complimentary LifeMiles Silver status during the first year, a $400 voucher for business class tickets, 2,000 bonus miles on your birthday and up to a 10,000-mile signup bonus. Members receive access to airport lounges with a complimentary Priority Pass membership and additional benefits when staying at REAL Hotels & Resorts and Visa Luxury Hotel Collection hotels. 

Why people like it 

Cardholders can enjoy Silver elite status for free the first year, which includes upgrades to business class 48 hours prior to your flight, access to Avianca and TACA VIP Lounges and Star Alliance Silver status, among other benefits.

Marriott Rewards Premier Visa

Earning 

The Marriott Rewards Premier Visa offers five points per $1 spent at Marriott, two points per $1 spent on airline tickets, restaurants and car rentals and one point per $1 spent everywhere else.

Benefits 

Cardholders receive a free night after account approval (Category 1-4 hotels) and an annual free night on a member’s account anniversary (Category 1-5 hotels). Cardholders also receive a 15-night stay credit toward elite status each year plus one elite credit for each $3,000 spent. The card also offers waived foreign transaction fees.

Why people like it

The annual free night can be used at Category 1 to 5 hotels, unlike the free night offered at account opening that is capped at Category 4 properties. There are still three categories above Category 5, but members can find some nice properties at this level, including the new Gaylord National Resort & Convention Center. Of Marriott’s over 3,000 properties, only around 200 properties are Category 6 or higher so the vast majority of hotels are bookable with the free night.

Silver elite status requires only 10 qualifying nights so cardholders will automatically receive Silver status that includes a 20 percent point bonus, late checkout and other perks. Gold benefits that include complimentary breakfast and a 25 percent points bonus start at 50 qualifying nights so the credit card can give members a boost to Gold, especially if you spend heavily on the card to earn one elite night credit for every $3,000.

United MileagePlus Explorer Card 

Earning

Cardholders earn one award mile per $1 spent on all purchases and double miles for tickets purchased through United.

Benefits

Members receive a complimentary first checked bag on United flights for the cardholder and one companion, priority boarding, two complimentary United Club passes on your cardmember anniversary, 10,000 bonus miles with $25,000 in spending each year and the ability to redeem miles for last seat availability Standard awards. If you add an authorized user and make a purchase within 90 days, you’ll get 5,000 miles.

Cardholders can also redeem their miles for a statement credit for United revenue flights purchased at United.com through the MileagePlus Choices program. Miles redeemed through Choices are worth about a penny per mile and you will earn miles and elite-qualifying miles on the flights. Members can also redeem their miles for the card’s annual fee reimbursement and exchange their redeemable miles for up to 5,000 Premier-qualifying miles or five segments through the Choices program at an exchange rate of 10,000 miles for 1,000 PQM or one PQS.

Why people like it

Co-branded credit cards became more valuable once the airlines started charging for checked bags. Checking one bag roundtrip on United domestic flights costs $50 roundtrip for non-elite members. For non-elite members who fly twice on United each year with a checked bag, the card’s annual fee is less expensive than the $100 in bag fees. United sells one-time passes to the United Club for $50 at club locations so the two one-time passes each year also adds value to the card, as does no foreign exchange charges. And if you don’t want to pay the annual fee, you can redeem miles to cover the cost.

American Express Membership Rewards 

Several credit cards participate in the American Express Membership Rewards program, including the Platinum Card, Premier Rewards Gold Card, Gold Card and Green Card.

Earning

Members with eligible cards earn one point per $1 spent. The Premier Rewards Gold card offers twice as many points on gas and groceries and triple points on airfare. 

Benefits

Members can transfer points into miles with Aeromexico, Air Canada, Air France KLM, Alitalia Airlines, All Nippon Airways, British Airways, Delta Air Lines, EL AL Israel Airlines, Frontier Airlines, Hawaiian Airlines, Iberia, JetBlue Airways, Singapore Airlines, Virgin America and Virgin Atlantic Airways. There is an excise tax offset fee of $0.0006 per point to transfer points into miles with domestic airlines, with a maximum fee of $99. Car rental partners include Avis, Enterprise and National and hotel loyalty program point transfer partners include Best Western, Choice, Hilton, InterContinental, Jumeirah and Starwood.

Why people like it

Members like AMEX Membership Rewards because of the program’s flexibility and wide array of award options. Cardmembers can redeem points for virtually anything with travel awards being one of the most popular choices. Cardmembers can redeem points for flight certificates on partner airlines, make flight reservations and pay with points or a combination of cash and points at the American Express travel website at www.americanexpress.com/travel or transfer points into miles or hotel points. And if you can be patient and wait for a bonus offer, the program frequently runs transfer bonuses where members can earn additional points or miles when converting points. American Express Platinum and Centurion cardmembers also have access to airport lounges in addition to receiving a $200 airline credit each year.

Delta SkyMiles American Express 

Earning

Cardholders earn one mile per $1 spent on all purchases and two miles per $1 spent on Delta purchases.

Benefits

Cardholders receive a 20 percent discount on in-flight purchases of food and entertainment as a statement credit. Perks at the airport include priority Zone 1 boarding for cardholder and passengers traveling in the same reservation, plus first checked bag free for cardholder and up to eight companions. Cardholders can visit Delta Sky Club airport lounges for $25 per visit per person for cardholder and up to two guests.

Delta SkyMiles is requiring elite members to meet new Medallion Qualification Dollars (MQDs) requirements in 2014. Members who don’t reach the required spending thresholds but earn enough Medallion Qualification Miles or Segments and spend at least $25,000 on their SkyMiles credit card are still eligible to qualify for elite status. Pay with Miles, the option to redeem miles to pay the entire price or partial amount of a Delta revenue ticket, is offered exclusively to credit cardmembers.

Why people like it

Delta SkyMiles American Express won the Freddie Award for Best Loyalty Credit Card in 2012. Members receive waived bag fees for their own bag and the bags of up to eight traveling companions. A non-elite family of four with each person checking one bag would save $200 per roundtrip flight with this benefit alone. Beginning next year, Delta will waive the new MQD requirement for elite members who spend a minimum of $25,000 on their credit card. Cardholders who acquire higher tier cards can earn elite-qualifying miles with the Platinum card and complimentary SkyClub access with the Delta Reserve card.

Alaska Airlines Visa Signature 

Earning

Cardholders earn one mile per $1 spent on all purchases and three miles per $1 spent on Alaska Airlines tickets and vacation packages.

Benefits

Cardholders receive an annual Companion Fare of $99 base fare plus taxes and fees. Members also receive a $50 discount off the initiation fee of a new Alaska Airlines Board Room membership.

Why people like it

The Alaska Airlines Visa Signature credit card was awarded the Best Loyalty Credit Card for two years in a row in 2010 and 2011. The most-loved feature continues to be the annual companion ticket, although it isn’t quite beloved as it once was. Until Aug. 1, 2012, the $99 companion ticket could be used on all paid fare classes, including first class, without capacity controls. Buy one ticket in any fare class and if there is a seat available, you could book another ticket in the same fare class for only $99 plus taxes and fees. The terms and conditions for the companion pass changed last year and now the companion pass can only be used on coach fares. Both the passenger and companion continue to earn miles when flying on the Companion Fare.

The Alaska Airlines Visa isn’t known for offering lucrative sign-up bonuses. The highest we’ve seen is 40,000 bonus miles and the standard offer is 25,000 bonus miles. But Mileage Plan is a strategic program for some. Travelers in the U.S. who don’t fly often enough on American or Delta to earn an award ticket in either program can choose to earn Mileage Plan miles instead and combine their flight earnings. And the companion ticket with the credit card remains valuable for those traveling in coach.

Starwood Preferred Guest American Express

Earning

Cardholders earn one point per dollar spent on all purchases and two points per $1 spent at SPG Hotels & Resorts, in addition to the points you already earn for hotel stays as a SPG member.

Benefits

Members can redeem points for stays at Starwood properties or convert points into airline miles. With most airlines, points convert at a 1:1 ratio with a 5,000 miles bonus when converting 20,000 points or more in one transaction. Redeeming points into airline miles and receiving the 5,000-mile bonus is the equivalent of earning 1.25 points per $1 spent, which is higher than the one mile/point per $1 spent on most airline cards. The transfer ratio with United MileagePlus, however, is one mile for every $2 spent so this is not as good an option if you collect MileagePlus miles.

Cardholders also receive a credit of five nights and two stays toward elite status and members who spend $30,000 or more per year are automatically upgraded to Gold status.

Why people like it 

As with American Express Membership Rewards, Starwood Preferred Guest points are extremely flexible since they can be converted into miles with 29 airline partners; redeemed for flights, merchandise, gift cards and tickets to exclusive events, not to mention hotel stays at over 1,100 participating hotels & resorts around the world. Award stays start at 2,000 points for weekend stays and members can also redeem fewer points and pay a cash co-pay starting at 1,500 points plus $30.

Choice Privileges Visa Signature 

Earning

Members earn five points per $1 spent on stays at Choice Privileges hotels, five points per $1 spent on purchases of Choice Privileges points or gift cards and two points per $1 spent on all other purchases.

Benefits

Cardholders are automatically upgraded to Gold elite status which gives members a longer booking window of 50 days instead of 30 days when redeeming points for free nights plus a 10 percent point bonus on paid stays. The card has no annual fee and comes with up to two free nights as a sign-up bonus.

Why people like it

This is the only card in our top 10 list that doesn’t have an annual fee. Choice Privileges is geared towards budget travelers who may not be willing to pay an annual fee to earn hotel points. Card-carrying members earn a total of 15 points per $1 spent on hotel stays, including the 10 points per $1 spent members normally earn for stays. Award stays start at 6,000 points so cardholders could earn a free night for every $400 spent on hotel stays.

Bottom line 

As the loyalty programs make changes, credit card benefits also evolve. When the airlines take away a benefit from regular passengers, they may continue to offer that benefit to elite members or credit cardholders. The benefits for elite members and credit cardholders sometimes overlap as the airlines and hotels attempt to retain their cardholders. Priority boarding, a benefit that used to be reserved for elite members, is now a common perk of airline credit cards. Airline programs offer elite-qualifying miles to members with their more expensive credit cards while many hotel programs offer elite status in their program as a credit card benefit.

The signup bonuses for credit cards reached a zenith during the economic downturn when the banks were scrambling to reach more customers. Over the last few months, the frenzy has died down some. But overall, signup bonuses are still healthy when you look at the history of the cards. The typical signup bonuses for the majors hover around 30,000 bonus miles with the occasional 50,000-mile or 75,000-mile offer to keep things interesting.

When airlines started charging checked bag fees in 2008, many programs began including a free checked bag as a credit card benefit, which immediately increased the card value for non-elite members who check bags. Delta announced it will be waiving the upcoming 2014 revenue requirement for elite qualification for their high-spending credit cardholders who spend $25,000 a year. Until Dec. 1, 2011, American Airlines permitted miles earned from co-branded credit cards to count for lifetime elite status. When they changed the policy, all miles earned by Citi Executive / AAdvantage World Elite MasterCard credit cardholders through Dec. 31, 2012 also counted toward Million Miler status. And sometimes, new benefits appear seemingly from nowhere, such as when American AAdvantage started offering a 10 percent mileage rebate (up to 10,000 miles per year) on award redemptions.

As for which card is the best card for you, the answer will invariably be different for each loyalty program member and will likely change over time. These Top 10 cards made the list for 2013, but we’ll have to wait to see which cards will be singled out as the best when the Freddie Awards roll around again next year.

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