Dear Sherpa: What's the best credit card for me?

Often friends, family and clients will write to the Sherpa and ask for advice, the Dear Sherpa section is where I do my best to guide them to the right travel decision.  Some of my fellow travel bloggers get referral fees for credit card signups (and they disclose it), but I am not so lucky just yet, so please note that I am not a financial adviser or professional, I am not paid for any recommendations I give, this is my opinion alone and your acceptance or rejection of such advice is of your own accord, however, the links do support my blogging brethren so if you settle on one that works for you, please click the links listed. With that out of the way...

Dear Sherpa:

Quick question....thinking about signing up for a credit card to throw our flights on so we can either get money back or collect points....the major company we have points with is BA.

I read this deal and they have a great program as of now until July 18th, but with BA it's expensive to use your Avios right? Also looking into the Delta one you sent me.  Basically what I would like is to get a new card, throw about roughly $6,000 [for two RTW tickets we are booking] on it and benefit as much as possible, whether through flights or cash back, because my American Express card has a horrible 1% cash back.  Anyways, my major question is, "Should I stick with BA because I'm living in Europe?"

-JQ

 

JQ:

Thanks for writing into the Sherpa.  Sorry to disappoint, but the Delta checking account with 30,000 miles bonus and the $75 annual fee is  now dead.  You can still sign-up but as of the 30th of June, the bonus 30k miles is gone.  If you signed up today you would only get 1-2 SkyMiles depending on your purchases, and it's not worth it without a bonus.

You are right, British Airways/Iberia Avios are costly to burn when you redeem on BA!  Oddly, however, if you redeem them on American, Aer Lingus, - even Iberia, or other partners that don't issue fuel surcharges, they are a great airline currency.  Before choosing a card though, you really need to decide how you want to spend your reward so let's look closer at the Avios chart.

The Avios award chart has made two major changes in the last year.  Firstly, it's now a calculator instead of a chart, and secondly, it's now route distance based instead of major area to major area.  What does all this mean?

Since you mentioned you have Avios here is a partial example of an award chart for British Airways oneworld partner, American Airlines.

 

The award chart generalizes North America (continental US, Canada, Mexico and some Caribbean) and all of Europe into just two buckets.  Someone who is living in Seattle, WA using 40,000 miles for an economy class ticket (20k each way off peak) to go all the way to Istanbul Turkey (14,420 miles return journey SEA-ORD-LHR-IST) pays the same amount as someone flying from Boston, MA to Shannon, Ireland (5,780 miles).  This is a great value to the consumer in Seattle and a poor value to the Bostonian especially considering that the cost of the ticket for the days I researched were $1125 from Seattle and $741 from Boston.  For the airline it is 2.5 times the distance to fly you for the same amount of miles.  Using your miles, wisely you can take advantage of these massive zones and get more from your award.

But not with British Airways...

Their distance based chart means that they have calculated a rate of Avios for distance.  This is great for the consumer in certain places.  For example, a one-way in the US from an American Airlines hub for a short journey is only 4,500 Avios plus $5 for taxes!  That's a great value  if you live near an AA hub.  If you were based in New York City, a ticket to Montreal can routinely go for $300-450, but this is just 9,000 Avios plus the taxes, a terrific value compared with American's own redemption chart which would be 25,000 miles.  Here is a very detailed guide to spending Avios,  the simplest way is to burn them on Iberia who do not charge the same fuel surcharge as parent IAG (British Airways).

You could also consider the SPG card which is a great hotel brand and will present serious savings if you choose to stay in nicer hotels - not to mention lots and lots of soap from Le Meridien.  If you are staying at places from AirBnB, a hotel credit card may not present a real savings.

Another card to consider is one with no specific program, but rather it's own convertible currency like Membership Rewards or Ultimate Rewards where you can earn points and then convert them into specific programs and amounts.  If you wanted to take a friend to Montreal from New York, you could convert some of your MR points into BA to redeem on American, and then some more redeemed on SPG to stay in a W Hotel for example, making it a cost free luxury getaway.

 

It's all in how you spend them, so the best card for you is what you perceive to have the most value, is it a few nights in a five star hotel or would you rather just couch surf but fly for free?  Lots of small trips or one big one?  Here are some finalists to help you decide:

 

1.)  British Airways Visa Signature Card® with up to 100,000 bonus miles - UP TO being the key word here.  That's 50,000 after first purchase (great first purchase bonus), 25,000 after $10,000 in spend within 12 months, and 25,000 more after the second $10,000 in spend within 12 months.  But that seems like an awful lot of spending.

There are lots of ways to increase your spending on cards without going into debt, but knowing you don't have business expenses, $10k in spending seems like a lot for your situation, and another $10k to get the full bonus is probably not obtainable for your situation.  It also comes with a $95 annual fee (pretty standard really), and earns 1.25 points per USD so in addition to the bonus miles of 75k if you spend $10,000 over the year, you would also get 12,500 additional miles bringing your total balance to 87,500 from the card without any travel activity or current balances. If you get CRAZY and spend $30,000 in one year, you'd also be entitled to a free companion award ticket for use on BA (not on American though!), where your travel partner flies for just taxes and fees, no additional miles spent.

The biggest advantage they don't really advertise is that because it is a Visa Signature card, many hotel chains and even some airlines will give you elite status with the card!  Hyatt honored this for a long time (not sure if they still do) and of course, once you get status with one, you could always match to another program if you would like.  That's a huge benefit saving you 10-15 nights at a hotel, and giving you stuff like free late checkouts, or internet, maybe breakfast depending on the brand.  Also it is chip and pin card, which in Europe is vital. It's a Visa so apparently it's everywhere you want to be, of course American Express may cause you some grief in Europe.

This is probably the best one for your situation, but here are some other worthy contenders.

2.)  Chase Sapphire PreferredSM Card: Fee waived for the first year (somewhat standard), 40,000 points after $3000 in spend within 3 months (totally manageable for your situation), there are no foreign currency conversion fees - which will be most critical as you use your card in Europe and you get double points on travel and dining, since this is mostly what you will spend on the card anyway, it makes sense that you would go with this.  It also allows you the flexibility to convert your points into a program only when you need to spend it and there are usually some great bonuses.

3.) Citi® Platinum Select® / AAdvantage® Visa Signature® Card - This is actually the card I carry, but it has been around for a few years and usually the bonus is better (30,000 bonus miles for signup today).  It worked for us at the time because we were flying a lot on AA, and we have kept the card because it is a Visa Signature giving us 10% of any redeemed miles back up to 10k in the first year - this is a great feature. As a Citi card you will also have access to their quarterly reduced mileage awards, so back to that trip to Montreal (I picked it because it is usually terribly expensive to get there even though it's so close to the States), you could actually book a return for just 15,750 AA miles.  This also gets you a free checked bag on AA (and up to four traveling companions), one mile per USD spent, and priority boarding.  It's "elite status lite" on AA and often full elite at some hotels (see above).

There are dozens of options, but because you already have some BA miles, and could use some of the elite benefits, I think these are the best cards for you, ultimately you will decide of course.

-Sherpa

Posted on July 3, 2012 and filed under Dear Sherpa.