Consumers who have been on the lookout for new credit card opportunities that will give them more benefits for every dollar they spend seem to be turning more often toward those that incentivize certain aspects of travel arrangements.
Since the end of the recession, rewards credit cards of all types have grown quite popular as consumers move to take advantage of the more generous offers being sent out by major lenders. But perhaps the fastest growing are for those that offer airline miles and other benefits specifically related to travel, according to a report from the luxury travel company Alpha Flight Guru. These days, hotels and airlines are giving away more than $50 billion per year in rewards points or miles and that number could grow as more consumers flock to this type of account.
Consumers generally view rewards credit cards as "free money," the ability to earn benefits for spending they would have done anyway, and a large number are using them to rack up perks that will cut their ongoing costs for expenses related to travel, the report said. As such, companies are now significantly increasing the value of the offers for these accounts. Typically, the most value on a "miles versus dollars spent" basis comes when booking business class tickets.
"Using credit cards has replaced flying as the top way to earn frequent flier miles. We found that the best use of points is on international first and business class flights," said Tim Gibson, CEO of Alpha Flight Guru. "The potential for savings is as high as 5 percent, or 5 cents per dollar spent on credit cards."
As a means of being more competitive within the industry, many card issuers are now looking for new ways to give borrowers perks without increasing the amount of cash back they can earn, the report said. This includes waiving baggage fees that others might face, as well as the ability to bypass long lines at airport security and go through cardmembers-only checkpoints instead.
However, consumers should also be aware that in many cases, the companies issuing these cards are offsetting the losses brought on by increased rewards programs with higher annual fees, which for some borrowers may make it more difficult to manage their account going forward.
