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Entry Level Airline Credit Cards and Why They’re Generally Not Worth It

by on May 12, 2014 · 24 comments

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There are a ton of airline co-branded credit cards on the market these days, but some of the most overlooked are the entry level cards with no or low annual fees. TPG contributor Jason Steele takes a look at these cards and examines whether they make sense or whether you should buck up and get the fancier versions that often come laden with valuable perks. 

Credit cards so crucial to the airline’s profitability, that most major carriers offer a whole range of cards with varying annual fees to appeal to their customers- from free to over $450 a year. While frugal cardholders might instinctively look to the card with the lowest annual fee, it rarely offers the best value in comparison to the more premium versions. Here’s a rundown of these base level cards and some of their premium counterparts.
Delta Base SkyMiles

Delta SkyMiles cards from American Express

Delta currently offers seven different versions of its SkyMiles card from American Express – four for consumers and three for business users. Their entry level card, which they hardly market, is a consumer card called the Delta SkyMiles Credit Card and it has just a $55 annual fee. For that, you get a mere 5,000 bonus miles after your first purchase, and a 20% savings on eligible in-flight food beverage and entertainment purchases, that’s it.

This is one of the least expensive airline cards offered, but is it a good deal? To move up to the Gold Delta SkyMiles card, you would have to pay $95 annual fee, but that fee is waived the first year and the sign-up bonus is 6x as rich and offers a statement credit. Offer details for Gold Delta:

  • 30,000 bonus miles after spending $1,000 in purchases within three months of opening an account.
  • $50 statement credit from a Delta purchase within the same time period.
  • A free checked bag fee waiver for the cardholder and up to eight others traveling on the same reservation.
  • Zone 1 priority boarding.
  • No foreign transaction fees.
  • Reduced fee access to Delta Sky Clubs.

So even after two years of card membership, Gold Delta SkyMiles cardholders will have enjoyed far more benefits while still having paid $5 less in annual fees than those holding the plain SkyMiles credit card! Until recently, Delta even offered its SkyMiles Options card that has no annual fee, but had an even lower sign-up bonus. If you still have one of these cards, its time to consider an upgrade.

On the flip side, if you have one of the more expensive Delta cards and you aren’t getting the perks and you simply want a card to help you hit Medallion Qualifying Dollars, then the $55 a year card might make sense.

Citi Gold MasterCard
American Airlines AAdvantage cards from Citi

American Airlines offers four different cards that earn miles in its AAdvantage program through its partner Citi – three for personal use and one business card. Their least expensive offering is the Citi Gold/AAdvantage World MasterCard, which has an annual fee of just $50, that is waived the first year.

The sign-up bonus for the Gold card is respectable – 25,000 American AAdvantage miles after spending just $750 within the first three  months of opening an account. Yet the strange thing about this card is that customers only earn one mile per dollar spent on all purchases, including those from American Airlines. At that rate, cardholders should charge their American Airlines tickets to their Chase Sapphire Preferred (2x on travel) or Amex Premier Rewards Gold (3X points per $1 on flights booked directly with airlines).

Travelers are much better off with the Citi Platinum Select/AAdvantage World MasterCard. It has an annual fee of $95, which is also waived the first year, but it comes with much better benefits:

  • Sign-up bonus of 50,000 miles after $3,000 spend in 3 months.
  • $95 annual fee, waived first year.
  • CHIP and Signature capability.
  • Double miles on all purchases from American Airlines.
  • Group 1 priority boarding.
  • First bag checked free for the cardholder and up to four others traveling on the same itinerary.
  • 10% mileage rebate, up to 10,000 miles returned each year.
  • Earn a $100 American Airlines discount each cardmember year when you spend $30,000 on the card.

Once again, the choice between these two cards it is not even close. Both cards have no annual fee the first year, and cardholders will only pay an additional $45 the second year for a huge list of benefits- the 10,000 miles rebated each year (if you spend 100,000 miles) is conservatively worth $150 per year, when you value AA miles at 1.5 cents (and many people value them more, at least for premium cabin redemptions).

US Airways: Has only one card, the Premier World MasterCard, which offers 40,000 miles after first purchase and an $89 annual fee. To read about all of the other benefits, check out this post. 

United Explorer
United Airlines MileagePlus cards from Chase

United currently offers three different MileagePlus cards from Chase, two personal cards and one business card. Unlike Delta and American, its current entry level Explorer card is a full-featured product and Chase no longer offers stripped down entry-level cards.

The highlights of the consumer version of the Explorer card are:

  • 30,000 bonus miles after you spend $1,000 within the first three months of card membership (Chase often targets people for 50,000 mile United Explorer offers and you may be able to get it if you walk into a Chase branch)
  • One mile per dollar spent and double miles on United Purchases.
  • A free checked bag for cardholders and one traveling compation.
  • Priority boarding.
  • No foreign transaction fees.
  • Two United Club Passes a year for one-time use each.
  • $95 annual fee that is waived the first year.

So while these are far better benefits than those offered by the entry-level cards from both Delta and United, travelers might consider another option short of the $395 Club card.

The United MileagePlus Explorer Business card has a $95 annual fee that is waived the first year, and offers all of the same benefits as the consumer version, but in addition it features:

  • 10,000 bonus miles every calendar year you spend at least $25,000 on your card.
  • Double miles on not just United tickets, but at restaurants, gas stations, and office supply stores.
  • It also may be possible to get a 50,000 mile sign-up bonus on this card

If you are grandfathered in, Chase used to offer new applicants a product called the United MileagePlus Awards card. It only offers one mile per dollar spent on all purchases, including those from United. If you still have this card, you are missing out on double miles for United purchases, baggage fee waivers, United Club passes, and no foreign transaction fees. For United MileagePlus Awards cardholders, it is probably time to upgrade to the Explorer card, especially the business version.

Southwest Plus and PremierSouthwest Rapid Rewards Cards from Chase

There are four versions of this card, two each in versions for businesses and consumers. The personal and business versions of the Rapid Rewards Plus cards have annual fees of  $69, and offer a 3,000 point bonus on your cardmember anniversary, worth about $42 toward any ticket in their “Wanna Get Away” fare class. So, the anniversary bonus covers 61% of the annual fee, right off the bat.

The personal and business versions of the Rapid Rewards Premier cards each have annual fees of $99, and offer a 6,000 point bonus on your cardmember anniversary, worth about $84. For the additional $30 in annual fees, you will receive an additional $42 worth of points, which are worth $84 if you hold a Companion Pass. So the $84 in anniversary bonus covers 85% of the annual fee cost- much better than the Plus cards.

Other benefits of the Rapid Rewards Premier cards over the Plus versions include:

  • No foreign transaction fees.
  • The opportunity to earn 1,500 Tier Qualifying Points for every $10,000 in purchases, up to 15,000 Tier Qualifying Points per calendar year.

So here, the advantage of the more expensive card isn’t as great as it is with the other airline cards, but it is still worth paying the extra $30 for most cardholders, if only to receive another $42 worth of points on your cardmember anniversary.

Bottom line

As with many aspects of credit cards and travel rewards, it can be too easy to focus on price and loose sight of value. Once you learn how the banks and the airlines have structured their credit card offerings, you will realize that their least expensive cards are often the least attractive.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Bruce Farley

    Valid points for those that can afford and meet the minimum spends for the bonuses. Keep in mind that the median annual household income is $50K.

  • Jim O.

    If you travel a lot (on United), the Chase MileagePlus Club Card is a good deal as it comes with annual membership to United Club and Partner Lounges. The $395 yr fee is cheaper than just buying the United Club membership each year. I have the Chase PresidentialPlus Card, which is no longer offered, but has the same and additional benes compared to the MileagePlus card. Well worth it if you travel frequently.

  • Beth Hedquist

    I used to use my CitiGold/AAdvantage World Mastercard all the time. It’s my oldest credit card so I don’t want to cancel it because of the long credit history. But I use my Barclay Arrival for daily spend, and only use the AAdvantage card for occasional purchases. So even though I am only paying $50 a year, I don’t think I’m getting my money’s worth. Any suggestions?

  • Ed

    Don’t forget the “only one lifetime bonus with AMEX” rule.

  • Ed

    Chase offers another United card that’s not listed in this article–their non-Explorer MileagePlus card. It only offers 1 mile per $2 spent, but there’s no annual fee. I only found out about it when I asked to waive my Explorer card’s annual fee after the first year, and they offered this card as an alternative.

  • Lynn Nguyen

    Great post, wish it had appeared two weeks ago! I just applied and received the United Explorer card. I’m still a little wary about applying for a business card (even though I know I can apply with my SSN) but oh well, hopefully I can use the 30K bonus plus United miles and take a domestic trip and call it a day on that card. Thanks!

  • Ben Price

    Has that officially gone into effect?

  • Ben Price

    Call to cancel–if they don’t initiate a retention offer conversation, ask for one. I had my Citi AA MC for less than a year, and they offered to waive the fee AND give me miles. Always worth trying.

  • Brenton

    My wife had the AAdvantage Platinum visa a year or two ago before were were aggressively pursuing miles. About a month ago she was targeted with an offer of 40,000 miles after $1k spend and an extra 10,000 miles with $5k in the first year, for the Advantage Gold!

  • thepointsguy

    Agreed and the 1.5 points per dollar spent is super lucrative for base level spending

  • thepointsguy

    Correct and most of these premium travel cards are meant for consumers with higher incomes

  • thepointsguy

    Nice!

  • thepointsguy

    Never hurts to ask for the increased bonus!

  • thepointsguy

    Good to know- that isn’t marketed anywhere- I’ll dig up some info and add

  • thepointsguy

    Never hurts to ask- the golden rule!

  • Bruce Farley

    It may be worth having a write-up (maybe you have it somewhere already) that outlines a good strategy to start with at the median income level. For example, many folks are trying to build their point portfolio and it wouldn’t take long for someone to spend/use them up for a couple of vacations, only to find themselves starting from scratch again. What would be the best way to build, use, and keep that momentum of accumulation? The beginner’s page needs another level added. It is a great writeup to get started, but misses the next set of baby steps. Overall, I do like your blog and sharing your experience tips and tricks. Great stuff here!

  • Miles

    I thought there used to be two or three versions of the US Airways card, including a no annual fee version that earned 1 mile per 2 dollars spent. (Not that I recommend this option.) Were those discontinued?

  • Barb

    There also is a no-fee Bronze card. I don’t know if you can downgrade to that, but it’s worth an ask.

  • Edward

    The United Explorer Personal card also offers 10,000 bonus miles every calendar year you spend at least $25,000.

  • Edward

    Many churners are business travelers (i.e. reimbursed) or do MS. But I do find the yearly bonus requirements insane! Unfortunately, they have become tied to earning status in some cases.

  • Jim O.

    What is this? Can you explain please?

  • Jake Kooker

    Aadvantage also has a ‘Bronze’ card with no annual fee, no perks, and .5 miles per dollar spent rate. Not at all worth the credit pull, but worth mentioning.

    On a related note, a question for you/the crowd at large: I’m looking at turning my Aadvantage platinum card into a no annual fee citicard, probably one with revolving 5% back categories (the agent on the phone confirmed they can change the card type to one outside Aadvantage, though he said it’s never advertised). I plan on then reapplying around December, which will be 17-18 months after my last application for an aadvantage card. Anyone know if this strategy will work, or will I not receive a sign-up bonus?

    Thanks!

  • Lynn Nguyen

    I asked and got an extra 20k. I told them since I didnt have a Chase brick and mortar in my state to walk in to. Hooray!

  • janet jackson

    I LOVE TO FART….

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