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How do miles work on credit cards?
August 30, 2024
Most of us love to daydream about jetting off to exotic locations for luxurious vacations — but air travel has gotten incredibly expensive.
The average domestic flight is about $330, although that can vary pretty dramatically. Head overseas, and you’re looking at an average round trip flight of $810. As a result, booking your plane ticket is often the most expensive part of going on vacation — which is where credit card miles really come to the rescue.
By choosing the right credit card, you can earn miles to redeem with an airline every time you spend money using that card. But there are a few caveats you have to bear in mind, and it’s important to note that not all travel rewards cards are created equal.
This guide explains what credit card miles are, how you can earn air miles, how to calculate and redeem your miles, and whether credit card miles are a better perk than cashback.
What are credit card miles?
If you’re new to the wonderful world of credit card rewards, you might not be super familiar with credit card miles. Don’t worry, because we’re going to walk you through exactly what they are.
Credit card miles (or “air miles”) are a loyalty benefit that some credit card companies offer to customers as a reward for using their credit cards to make purchases. That means the more money you spend using your air miles credit card, the more miles you’ll accumulate.
Your credit card company will have partnered with an airline provider to define how many air miles each eligible purchase is worth. For example, your credit card company might offer you one mile for every $1 you spend using your card.
But once you’ve accumulated enough miles on your credit card account through eligible purchases, you’ll be able to redeem those miles for a seat with one of your card company’s airline partners.
Your miles could be exchanged for part of the cost of a trip, and then you’ll end up having to pay the rest in cash or by purchasing additional miles to make up the difference. But if you’ve spent enough using your card, you might be able to score an entire two-way trip free of charge.
It’s important to note that airline carriers tend to set the number of miles required to travel — not your card company. Likewise, the number of credit card miles you’ll need to redeem for a vacation may vary depending on where you’d like to go, whether it’s peak travel season, how much a flight would normally cost without any air miles, and whether you're booking a domestic flight or international flight.
Either way, the bottom line is this: if you travel frequently (or would love to start), credit card miles can be a fantastic perk.
How do you earn air miles using a credit card?
When you’re shopping around for a new credit card, providers will normally advertise air miles as a central perk. That’s because not every credit card offers miles — but how you earn miles with each program will be pretty similar.
Credit card miles work a bit differently from a frequent flyer program. With frequent flyer miles, you’ve got to buy flights using your credit card to accumulate miles which can then be redeemed. This works well if you fly a lot for work or leisure, but a lot of us aren’t in a position to buy loads of flights every month.
Credit card miles help you accumulate miles a lot quicker. Instead of earning miles every time you fly somewhere, air miles rewards schemes give you a nominal number of miles for every dollar you spend using your card. That means you can build up enough miles to pay for flights without ever having to set foot in an airport. You just have to use your travel rewards credit card on everyday purchases.
When considering different airline credit cards, it’s vital you find a card that’s going to match your spending habits.
For example, if you spend a lot of time flying with American Airlines, it makes sense to choose a credit card that’s partnered with American Airlines. The same could apply if you love flying with Southwest Airlines. Cards that are exclusive to one airline sometimes offer slightly higher mileage.
But if you aren’t worried about which airline you’re traveling with, there are loads of generic travel credit cards that will enable you to shop around between multiple airline partners. This frees you up to earn and redeem miles on a more flexible basis.
You should also bear in mind that quite a few credit cards that offer airline mileage programs are going to have an annual fee. This can put some people off, but cards with an annual fee often earn bonus miles faster.
Finally, you should be looking for airline credit cards that offer a sign-up bonus. These kinds of bonuses normally offer a fairly large number of miles if you spend a certain amount using your card within a promotional period. For example, your credit card issuer might give you 50,000 miles if you spend $1,000 within 60 days of setting up your card.
How do you calculate credit card miles?
Because a credit card company’s airline partners are responsible for deciding how much a credit card mile is worth, it’s important to consider how air miles are calculated.
Most card providers are going to have a pretty transparent (and often simple) formula for calculating air miles. For example, $1 spent on your card will earn you one mile on your rewards account. As a basic rule of thumb, a credit card mile is usually worth one cent. But as we’ve already mentioned, some programs will offer you more or less for each mile.
On every billing statement, you should be able to see how many miles you’ve accumulated via your credit card miles balance. But you’ll also be able to view your progress by logging into your online credit card account or by getting in touch with your card issuer.
It normally takes a couple of days after a transaction is cleared for miles to be credited to your account — so don’t panic if you’ve made a big purchase on your card and your free miles don’t appear instantly.
How can you redeem credit card miles?
Every credit card rewards program is a little bit different. That means the way you might redeem air miles with a CapitalOne card might be different from an American Express card or Chase Ultimate Rewards card. But there are going to be some core similarities.
No matter what card you have, your issuer will have an online portal that you can use to view and redeem your rewards. You’ll normally be able to access that portal by logging into your credit card account online and choosing a “redemption” option. It’s worth noting that many programs will have fine print around the dates you’re allowed to redeem certain rewards.
From there, it’s simply a matter of inputting the location you’d like to fly to, choosing dates, and getting your flights booked. Sometimes, you may need to redeem your miles for gift cards that can be used with a particular major airline.
To maximize your air miles and make the most of redemption rates, you should always try to book as far in advance as possible. Search for a trip a few months in advance if you can — because you’ll have a wider selection of dates at a lower redemption cost. If you try redeeming miles for a last-minute trip, you might also be charged an additional fee.
One more point worth exploring is transfer partners.
There are some rewards cards with high limits that offer transferable points. You can normally redeem transferable points by researching a flight with the airline carrier itself and then use your credit card rewards portal to transfer your miles to the customer account you have with your airline of choice to book with them directly.
This process means a little bit more work for you — but it also offers extra flexibility by letting you book with a wider range of airline carriers.
Airline miles vs. cashback: what’s better?
We’ve looked at miles on credit cards and how they work. Now, you’re probably wondering whether airline miles are better than cashback. Unfortunately, there’s no clear answer.
Cashback and air mile cards offer customers helpful perks as a reward for spending. If you go for a cashback card, you’re going to have a lot more flexibility in how you spend your rewards.
In some cases, that’s a great thing because it frees you up to earn cash for lots of transaction types. But by earning miles rather than cash, you might also be able to save yourself from yourself and will be able to accumulate a bigger reward amount because you can only redeem your miles for a plane ride.
When deciding which types of credit cards are right for you, consider what you want to achieve with your spending and what you’re more likely to use. It’s also crucial to look at fees and beyond short-term bonuses to ensure your rewards card will suit you in the long term.
No matter which card you go for, you’ll be earning a reward every time you use your card.
Conclusion
At the end of the day, credit card miles are an amazing perk if you’re a frequent flier (or a young adult with your eye on a dream vacation). But before you start applying for all sorts of rewards credit cards, you have to understand how air miles work, how you can redeem those miles, and how this reward differs from cashback programs.
Just remember to take your time, do your homework, and don’t be afraid to ask for advice if you’re unsure of how any element of a card works.
So, are you ready to start earning air miles?
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