Editor's ChoiceCategories Credit Type Issuers Blog

How To Use Your British Airways Executive Club Miles

04/07/2011

As I have been writing, the British Airways Visa Signature® Card -Limited Time Offer is now offering 100,000 miles as a sign up bonus. While this is an incredible number, it begs the question; What can you do with these miles?

Using Miles On British Airways

This is the most obvious use of the mile, but it comes with several potential drawbacks. Nearly all British Airways flights go through London, with a few through Birmingham or Manchester. Their award chart is not bad, and their award seat availability is said to be decent.  The big problems here is BA’s outrageous fuel surcharges.  These are so out of line with even the most onerous “taxes and fees” that BA awards are really just discounts.  The surcharges are per flight, so continuing to destinations past London can double the surcharge.  Furthermore, the charges increase with the class of service.  It is not hard to put together an award itinerary in Business or First where the fuel surcharges add up to over $1,000. They even apply to infants carried on your lap!
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How To Redeem Your Capital One Miles For Travel Expenses

04/06/2011

I, like many others, have already received my 100,000 miles in their Match My Miles promotion.  For me, it was easy, as I was already a Capital One customer.  With a single phone call, I changed cards from my previous one to their Venture One card.  Next, I sent in a copy of a qualifying airline statement with over 100,000 miles. Finally, I charged the required $1,000 to my new card. Soon, I was sitting on a six figure pile of miles just waiting to be redeemed.

What Qualifies?
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Capital One Gives Out Their Billion "Miles"

04/05/2011

A few weeks ago, I was excited to learn that Capital One was holding a “Match My Miles” promotion where new recipients of their Venture Rewards card would be eligible to receive up to 100,000 “miles” from Capital One by submitting a statement from a frequent flier program.  The terms indicated the miles had to have been accrued from credit card spending, but further investigation revealed that pretty much any existing mileage in an eligible account would be “matched”. The terms of the offer indicated that they would only offer it until 1 Billion “Miles” had been matched.  This morning, Capital One announced they had reached that figure and the offer is now closed.

Why This Was Such A Great Offer
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Guide To Lost Luggage

Nobody likes to think of it, but there are two types of travelers.  Those who’s luggage has been lost, and those who will have an airline loose their luggage in the future.  Here is what you should do to ensure that you never loose money when your an airline looses your bag. If you take the right steps ahead of time, you will probably make money from lost suitcases.

Before Traveling

Every time you luggage, keep a receipt. Every time you clothing, save the receipt.  Clothing is about the only thing that an airline will actually compensate you for, although there are exceptions such as furs.  When the time comes to fill out a claim form, you will then submit receipts for all of your missing clothing.

Packing Tips

Be familiar with airline’s rules regarding compensation for lost or damaged luggage.  The rules exclude all sorts of things from compensation including electronics and pretty much anything more valuable than clothing. For heaven’s sake, never pack anything valuable or unique.  Never pack medications, car keys, passports, or tickets.

Another tip is to plan for the possibility of the airline loosing your bag.  Pack in your carry on everything you need for a day or two at your destination. Pack under the assumption that you bag will be lost, and carry on not just your valuables, but any necessary items that will be difficult or time consuming to replace at your destination.  Feel free to check items that are easily obtained wherever you are going.

I have always been a proponent of carrying inexpensive bags. I find that generic bags purchased from discount stores such as Ross, TJ Maxx, and Tuesday Morning can last for years. Ultimately the airline will loose or damage the bags, resulting in your reimbursement for their cost.

When Your Bag Is Lost

We all know the feeling of seeing the last bag come off the carousel and watching it shut down. The most important thing to do is to make sure you file a claim in writing at the airport. Most airlines require that a claim be submitted for any loss or damage within 24 hours, but in reality, once you leave the airport, all bets are off.

The worst case scenario is when you arrive on the last flight of the night.  If that flight is delayed, it is possible that the baggage office will be closed. In that case, you must call the airline and try to file a claim over the phone.  At the very least, you should ask the airline representative to make a notation in your record.  You should also record the name of the person you spoke with.  The next day, you will then have to return to the airport.  At best, you will retrieve your bag, but at worst you will have to fill out the claim form to comply with the 24 hour rule.

Conclusions

While it might seem more likely that an airline will loose your bags when you have a complicated itinerary, I have not found that to be the case.  In fact, it has been my experience that may bags have been lost or delayed more often on non-stop flights.  By planning ahead, packing smart, and making a timely claim, you can ensure that lost bags are an inconvenience, not a major catastrophe.

The Durbin Amendment Kills DEBIT Card Rewards, NOT Credit Card Rewards

04/04/2011

I have recently been getting a flurry of comments for a post I wrote almost a year ago about the Durbin Amendment to the Dodd-Frank financial reform legislation.  At the time I wrote this, it was only a proposed amendment and nothing was certain.

There seems to be a lot of confusion here, as various banks are announcing that they are doping rewards for their debit cards.  What is important to understand is that the Durbin amendment was carefully crafted to only affect debit cards, not credit cards. Yes, a debit and a credit card look the same to the cardholder and even to the cashier at a store.  Nevertheless, the government has proposed restricting debit card merchant fees to a mere 12 cents, and 80% decline in the average debit card merchant fee.

What Does This Mean?

Merchant fees are how banks earn income on every transaction. The larger the merchant fee, the more that the bank has to offer as a kickback to entice customers.  These kickbacks are called rewards.  As a credit card rewards blogger, I like the kickbacks and I don’t feel guilty accepting them. Merchants whine and complain incessantly about merchant fees, yet almost all of them still continue to accept credit cards rather than just cash or checks. That is because credit and debit cards provide value to merchants. Both of them are much more secure than handling cash.  Neither is subject to fraud in the same way that checks are.  Credit cards allow people to borrow money, which promotes sales.

The worst thing that I often hear is that “consumers pay merchant fees in the form of higher prices”.  This is utter nonsense. Prices are set by supply and demand, not by the transaction costs to the merchants. It is so disingenuous of the merchants, the ones paying the fees, to attempt to convince the public that it is really the customer paying the fee.  Accepting credit cards is a cost of doing business.  Some companies only accept credit cards, while others never do. These costs are no more passed on to the consumer than any other cost of doing business from labor to rent to capital.

Now that debit cards have minimal merchant fees, it is clear that banks will no longer offer much in the way of rewards for debit cards.  This would, by itself, encourage people to use reward earning credit cards.  In fact, credit cards have always had more of a reward attached than debit cards, hence my allegiance to reward credit cards.

Another scenario is that retailers will begin to offer discounts for cash or debit cards in order to encourage their use over credit cards for which they pay a higher fee.  One reason that this is unlikely is that Durbin cut out an exemption for smaller credit unions. That means that there is no way that a merchant will know that a debit card will have a 12 cent swipe fee or a higher fee that credit unions are entitled to.

Where Do We Go From Here?

If you are happy with your credit card rewards, they will not change.  If you still get rewards from your debit card, expect them to disappear very soon.  The next time the merchants go to Congress and ask for swipe fee reform of credit cards, know that this will mean the end of credit card rewards, just like it did for debit cards.

Why Southwest's Airplane Has A Sunroof

By now, you have probably heard that one of the Boeing 737-300 aircraft suffered a rupture of it’s skin in flight, opening up a 5 foot gash in the ceiling and prompting an emergency landing. The cause of the failure has been attributed to metal fatigue. Allow me to try to break this down in layman’s terms.

What Is Metal Fatigue?

Have you ever bent a paper clip or a coat hanger back and forth until it breaks? This is metal fatigue, the use of stress to break down of the molecular bonds that give metal its strength. At the same time, people wonder why a jet liner would fail, as it certainly isn’t being bent back and forth like the paper clip.

Or is it?

Have you ever sat in the back of the plane and noticed the whole cabin bending upon touchdown?  Have you ever looked at the wing and seen it flex up and down in turbulence?  Those are merely the visible indications that the body of an airplane is not a static structure. It is a malleable creation designed to flex rather than be brittle. What you can’t see is the effect of pressurization on the metal structure of the aircraft. Pressurization is what makes it possible for the cabin of an airplane to hold an atmosphere that is breathable when the airplane is flying at altitudes that people cannot survive. People in the business occasionally refer to pressurized planes as ‘inflatable’. Every time the aircraft climbs to high altitude, the cabin is inflated to higher pressures. Like a balloon being inflated, this causes the skin to expand slightly. Do it over and over again, like an airplane that repeatedly makes short flights, and the skin is being flexed just like the paper clip.

What To Do About Metal Fatigue?

Up  until 1988, airlines weren’t particularly concerned about metal fatigue. And then, Aloha Airlines flight 243 suffered an incredible failure of entire sections of the fuselage.  This resulted in the death of a flight attendant and the injury of 65 people.  The cause was traced to corrosion and metal fatigue. The contributing factors were the frequent take-offs and landings made by high frequency, inter-island flights. Corrosion by salt air was also a factor.

Since that landmark incident, airlines and regulators have been scrutinizing airplanes to a much higher extent. Airplanes are regularly stripped of their interiors and examined for cracks at a microscopic level. Cracked portions are either patched or replaced. With proper maintenance, an aircraft should last decades. For example, Delta is still flying 35 year old DC-9 aircraft that they inherited from Northwest.

What About Southwest?

Southwest has suffered a similar incident like this in 1988 when a football sized hole opened up in one f it’s aircraft.  Like the recent incident, there were no fatalities or serious injuries. The aircraft involved in the latest Southwest incident was merely 15 years old. That is a little older than the average age of their fleet, but it is certainly not their oldest plane. Considering that the 737-300 was produced from 1981 until 1999, this plane was one of the newer 737-300s out there.

These facts strongly suggest that there is some sort of maintenance issues that are failing to catch developing cracks in the fuselage of their aircraft.

Should You Fly Southwest?

Despite these troubling maintenance failures, I still remain a fan of Southwest. Air travel in the United States is still posting incredible safety numbers in recent years. The only fatality ever attributed to Southwest airlines in its 38 year history was a person on the ground in this incident.

I have plans to travel with my family on Southwest, and I have not considered changing them. Air travel will never be risk free, but it is by far the safest way to travel. You are several orders of magnitude more likely to die in a traffic accident than you are on a schedule passenger aircraft. This is still a troubling incident, but I expect regulators to take serious measures to ensure that it never happens again.

Visa Offers New Payment Feature

04/01/2011

Ever since the implementation of the CARD Act, people have been complain that credit card payment options are too confusing and restrictive. Minimum payments have been raised to the point where many are unable to pay their minimum balances. Today, Visa has broken new ground with an alternative to the hated minimum payment and the confusing charts that try to explain when debts will be paid off.

How This Will Work

The new payment system is based on the experience that many popular musicians have had with voluntary payments. When card holders get their bill, they will see their balance, but there will be no minimum payment listed. Customers will then pay what they feel like, based on their own estimates of their ability to pay.

This system offers several advantages. First, it is expected that Visa will see delinquency rates plummet among cardholders who opt for this novel payment plan. Without a minimum payment, it will actually be impossible to miss a payment or default. Reducing delinquency rates is seen as the key to boosting investor confidence in Visa and ultimately helping its stock price.

By accepting the new plan, customers will have to agree to make their credit card debts transferable to future generations. In this way, Visa can continue to charge interest and fees on unpaid balances with the knowledge that the cardholder’s descendants will be responsible for the debt. In this aspect, the new plan more closely resemble the long term budget strategy of the federal government.

Customer’s Reaction

Overall, Visa claims that the response has been favorable. Unemployed customers are especially excited about the chance to continue to use their credit cards in the absence of any means to repay their debts. Another group of customers who are expected to adopt this new payment system are those who have taken out multiple pay day loans in order to pay their minimum balances. Consumer advocates are optimistic that they will now be able to break the cycle of predatory lending by just charging their purchases to credit cards that do not have monthly payments. Without the burden of compulsory repayment, these people will have new opportunities to make important purchases such as lottery tickets and furniture rentals.

In Conclusion

It is difficult to see how a system like this can have any drawbacks. By delaying repayment of debt until the time that it is convenient for customers, banks will see their stock soar in the short term, while customers can break free from their cycle of debt. In the past, making the minimum payment has been a real challenge for so many that carry a balance, but now that will not be a concern. Industry analysts predict that Visa’s success will spur their competitors to quickly create similar payment avoidance systems. It is my prediction that we will look back on today, April 1st, as the day that Americans finally found a practical way to manage their credit card debt.

Southwest Announces Their "Pilot For A Day" Program

Spurred by a renewed interest in aviation and their desire to promote the features of their latest aircraft, Southwest Airlines is now offering their customers the chance of a lifetime; to be a professional pilot for the day. According to their spokesman, they have been telling people that their new aircraft are so easy to fly, that even a child could do it. To put their money where their mouth is, they are now going to give customers ages 12 and up the opportunity to fly one of their aircraft on an actual revenue flight.

How This Will Work

For the price of a regular ticket, Southwest customers can select an additional flight training option that will include a half hour orientation on the fundamentals of aviation and the operation of their aircraft. Essentially, they will learn how to enter the destination into the flight computer and turn the engines on. Next, all they have to do is steer the plane towards the runway, and shove the throttles forward when given clearance for takeoff. According to the company pilot in charge of the program, it is really that simple.  They will also receive their own copy of “The Dummies Guide To The Boeing 737.”

Security Concerns

Obviously the issue of security needed to be addressed before the FAA and the TSA would permit this unique program to begin. The TSA’s main concern was that “pilot for a day” customers be given a thorough body cavity search before being allowed to operate the commercial aircraft. The FAA wanted Boeing to adapt the cockpit information system to receive programing from the in-flight entertainment system in order to alleviate the inevitable fatigue that results from operating such highly automated aircraft.

What’s In It For Southwest

By substituting a passenger for the co-pilot, Southwest is planning on realizing substantial labor savings. In the past, co-pilots were selected from a pool of experienced regional airline captains. The downside was that these people actually expected to be paid for work that others would gladly do for free. Also, by moving a passenger from the cabin to the cockpit, an additional seat is opened up for sale.

How To Participate

Interest has been overwhelming since the announcement of this program on April 1st. If this sounds like something you might be interested in, I urge you to contact Southwest immediately in order to secure the co-pilot seat on a flight of your choice.

Gift Cards From Office Supply Stores Outsmart Spending Categories

03/30/2011

I recently visited an office supply store and saw a large rack of gift cards for sale. Nothing unusual there. I then remembered that I hold an American Express Business Platinum card. It offers 5% cash back on purchases from office supply stores. That got me thinking. Immediately, I noticed two different gift cards from companies that I would likely do business with. The first was Southwest Airlines.  Certainly 5% off of a Southwest ticket would be something, especially for my family of three.  The next card that caught my eye was from the Home Depot.  I would certainly have to consider this when it came time for my next major project or appliance purchase.

Is It Worth It?

At best, I might value my rewards from my Capital One Venture rewards card at 2% or maybe 3% from my Starwood.  I would then have to weigh the additional percent or two against the hassle of purchasing the cards and using them.  I also should consider the risk that the gift cards are not used.  While I don’t think I would lose them or forget about them, I am sure a large percentage of cards end up that way.

This trick can be applied at grocery stores when they are being rewarded at a higher rate by spending categories. Playing the reward card game is all about the percentages. We obsess over a new card that offers a slightly higher returns and there are so many cards that offer increased rewards for different categories of spending.

Dallas To Indianapolis? – Which Airline Credit Card To Get?

03/29/2011

Here’s a question I got recently from a reader:

I have a question reguarding applying for credit cards. I am fairly new with credit, just have one credit card now and it is a retail store’s (Von Maur) that I have had for a little over 6 months and has no balance currently, have never been late with payments, etc. Now I am looking to relocate for a job (I am currently unemployed and a college grad). To move across the country, I was looking into applying for a card that can earn airline miles.

Is this possible? Or do I need to get a “bad/no credit” credit card to establish more credit first?
(I live with my parents and paid cash for my car so rent, etc. will not help my credit score)
thank you so much for your help/advice!

I asked her a few more questions:

Mr Credit Card – Firstly, you should be able to get a card based on the fact that you already have a card and hence a history. Question is :

1. what miles do you want to earn? eg continental, american airlines delta?
2. Why and where do you intend to use the miles to fly ? eg from where to where and why?
3. how much would you charge to the card a month (assuming you pay in full).

trying answering these questions and we should be able to give a good suggestion.

hank you so much for your quick feedback!! First, I am looking at American airlines since their main hub is in Dallas/for worth, where I am looking to move. I would be using miles back and forth to Indianapolis As far as monthly charges, I don’t plan to use the card for everything, but imagine uses like gas, groceries, etc

I asked her one last question:

Mr Credit Card – how much would an average airline ticket cost from dallas to indianapolis (I know I could check but thought you would know it off the top of your head?).

I’ve been looking recently and it looks like around 250-300 roundtrip

Answer – Ok- let’s start with a few basic facts.

  • 1. Your average airfare cost between $250 and $350
  • 2. You’ll be using your card on some purchases like gasoline etc
  • Key Decision – They key decision you have to make is whether to get a Citi AA Card (with annual fee) or get a travel rewards credit card without annual fee.

    Here are some other things to consider. The first is the award redemption for American Airlines AAdvantage Program. For flights within the Continental USA (relevant in your case), there are two award tiers. The first is the MilesSAAver award at 12,500 miles. The other is the AAnytime award at 25,000 miles. These are both valid for economy class tickets.

    The MilesSAAver award is less flexible in terms of dates and availability. The AAnytime award is more flexible and you can get a flight as long as seats are available when you book them.

    The Case For AAdvantage Credit Card – You choice of whether to get no annual fee travel rewards credit card or the American Airlines Visa will depend on whether you are able to use the MileSAAver award over the AAnytime award (you need half the miles). If you tend to book your fligh way in advance and have some flexibility in your calendar, then it would appear that the AA card will be better for you (or a card that let’s you convert points into AA miles).

    If this is the situation then the choice is between the Citi® Gold/AAdvantage® World MasterCard® and the Starwood Preferred Guest Credit Card. As a background, there are three versions of the AA card, the Bronz, Gold and Platinum version. The issue that I have with them is that despite an annual fee that you pay, you do not earn double miles. Among the three, the Gold version is the best to get (it has a $50 annual fee).

    But you can also consider getting the Starwood Preferred Guest credit card from American Express. The reason is that Starwood allows you to transfer points into AA miles at a one for one ratio. Plus, when you transfer 20,000 points into miles, you get 5,000 bonus miles for free (it is as though Starwood would rather you redeem points with their airline partners than at their hotels!). The annual fee is $65.

    Case for No Annual Fee Travel Credit Cards – If you find that you are redeeming flights using the AAnytime award, you are probably marginally better off with the Blue Sky from American Express. With this card, you earn 1 point for every dollar that you spend on the card (same as AA card). But you only need 7,000 points to redeem $100 in statement credit. You can book your flights any way you want (with AA or with online sites) and you will receive a statement credit based on how many points you have earned.

    Since you flights will cost about $250 to $300, the value you get using the Blue Sky is not much different from the AA cards. Furthermore, the Blue Sky has no annual fee (though there is an annual fee version that allows you to claim for baggage fees up to a certain amount a year).

    Another card to consider is the Chase Freedom. You can redeem points on their online travel portal or like the Blue Sky, you can use any travel agent and use points to pay for that travel expense. The advantage this card has is that being a cash back credit card, you could earn more than 1% rebates on many types of spending. They have 5% rebate on categories that rotate quarterly. They also have an online shopping portal where you can earn extra rebates when you shop with their partners. This card might just enable you to rack up more points than the Blue Sky.

    Conclusion – The choice at the end of the day really depends on the type of award you would use with AA and how much you spend on the card (which to a certain extent, determines whether a card with annual fee is worth it).

    Good Luck.

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