Entry Level Airline Credit Cards and Why They're Generally Not Worth It
Update: Some offers mentioned below are no longer available. View the current offers here.
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 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 Credit Card from American Express, 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.
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 Premier Rewards Gold Card from American Express (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 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 United MileagePlus 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 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 Southwest Rapid Rewards Plus Credit Card 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 Southwest Rapid Rewards Premier Credit Card 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.
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.