Bump up frequent flier miles with sign-up bonuses
Higher airline rewards allow new card-churning strategy

Elizabeth Brewster, April 10, 2008

With sign-up bonuses for airline rewards cards hitting new heights, savvy frequent fliers can pocket thousands of extra miles -- for free -- by signing up for a succession of credit cards with mileage bonus offers. Pocket the miles, ditch the card, and repeat as necessary.

It's a good time to go for the rewards, say industry observers: As lenders and airlines compete for the prized frequent flier demographic, credit cards are offering bigger and better airline mileage extras to woo new customers. Getting such cards one after another is a strategy that can put your credit score at risk, but credit experts say responsible credit users can manage it.

Airline mile bonuses build
There was a time when the standard sign-up bonus for an airline-affiliated credit card was about 5,000 miles, says Tim Winship, editor-at-large for "It's only in the past two to three years that it's really become more or less industry standard to offer enough -- or almost enough -- frequent flier miles for a free ticket."

Randy Petersen, editor of Inside Flyer magazine, goes a step further. "Today, if you're not getting 25,000 miles, you're not doing very good," he says, because mileage bonuses "are way, way up there." There even have been offers up to 40,000 miles for some of the business cards, he says.

Enjoy the high-flying times while they last, he warns: Bonuses are unlikely to keep climbing because the economics wouldn't make sense for card issuers. "We're probably at 95 to 100 percent of what we'll ever see in bonuses," says Petersen.

It's no secret to the credit card industry that some consumers "churn" rewards cards, grabbing sign-up bonuses and then ditching the cards, but for now, the issuers don't mind.

"They've already built in that a lot of people are going to try to sign up for the bonus and not use the card," says Robert Manning, research professor and director of the Center for Consumer Financial Services at the Rochester Institute of Technology in New York.

Where the points are
Where can you find the best sign-up mileage bonus offers? You can find airline frequent flier bonus mile reward cards online. If you have excellent credit, your mailbox is probably stuffed with them already. It pays to open each mailing, though, because the same lender will often try to entice you repeatedly with different combinations of bonus miles, fees, and redemption conditions.

Citi's Aadvantage Citi Select American Express and Citi Platinum Select World MasterCard, for example, each award 25,000 American Airlines miles when you spend $750 within your first four months, while United's Mileage Plus Platinum Business Card delivers 20,000 miles after your first purchase. Both cards waive their hefty annual fees for the first year.

Before chasing the rewards, you'll need to decide if it makes financial sense for you. You'll reap the highest benefits with the least chance of damaging your credit rating if you:

Have an excellent credit history and a high credit score.
Always pay off all your credit card balances every month.
Don't have any outstanding credit card balances.
Can resist the temptation to use every credit card you have.
Won't need to apply for another consumer loan, such as a car or home loan, for the next three to six months.

Keeping your score
Repeatedly swapping credit cards can ding credit ratings.

"Each time a consumer applies for new credit, a 'hard inquiry' is generated, causing a slight impact on the credit score," says Steven Katz, a spokesman for TransUnion, one of the three major consumer credit reporting agencies.  "Opening multiple new credit accounts over a brief period of time will amplify that score impact. How much that affects an individual's credit score will depend on that individual's own circumstances."

Spacing your credit card applications throughout the year can lessen any damage, experts say. "If you did three or four applications within a month or two months, that could start to make a significant ding on your score -- 20, 60, even 80 points," says Evan Hendricks, author of "Credit Scores & Credit Reports" and longtime editor of the Washington-based newsletter "Privacy Times."

Dedicated credit card rewards collectors tend to monitor their credit reports regularly. Aaron McCrea is a Bloomington, Ind., lawyer who has racked up more than a million American Airlines frequent flier miles since 1997, primarily through personal and business credit cards and bonus offers. "I've kept track over the 10 years, and it's had no negative effect on our credit rating," he says. McCrea says he regularly uses four credit cards to earn miles, supplemented by the occasional new card with an enticing sign-up bonus.

Is it worth it?
Read the fine print before you apply for any new credit card -- but especially if your interest lies only in the sign-up bonus.

Here's what to look for:

• Annual fee. If there is one, is it waived for the first year (or more)? If not, how does it compare with the value of the bonus you'll receive? If the fee is $49, for example, but you'll receive enough miles or points for a free ticket to Hawaii, you might not mind paying for the card.

• Spending requirements. You may have to spend a certain amount of money with the new credit card (for example, $1,000 in the first 90 days) before you receive some or all of your bonus miles. Is this money you would be spending anyway, or would you have to make unnecessary purchases to hit the total?

• Cancellation conditions. If you're not planning to keep and use the card, find out whether you'll be able to redeem your bonus miles or points even when you're no longer a cardholder. In some cases, you might not receive all of the bonus miles until you've held the card for a specified number of months or even years, and you might have to pay an annual fee at some point.

• Redemption rules. Some of the bank travel reward cards have very complicated conditions for redeeming points for a reward or even for accrual, says Jay Sorensen, president of product, partnership and marketing practice for IdeaWorks in Shorewood, Wis. With an airline-sponsored card, the bonus miles might automatically show up in your existing frequent flier account, so you'll redeem them as you would any other miles. With nonairline travel cards, such as those sponsored by Capitol One and American Express, you might have to follow special rules for purchasing a ticket with miles or points, or specifically request that miles be transferred to your frequent flier account. Be sure to note whether the bonus miles or points expire within a certain time limit.

Blackout dates and other limitations. Although most bonus offers tout the absence of blackout dates, the reality is that some tickets are tougher to get than others. "Some programs are saying no blackout dates, but instead they're closing out dates for award tickets by inventory control," says Sorensen. "That 25,000-mile reward ticket? For many people it's fiction because it's just not reliable anymore." You may need to be flexible about traveling off-season and at off hours to redeem your miles or points.

To cancel or not to cancel?
Once you've banked your bonus miles, you have two choices if you're not planning to use your new card again: keep or cancel.

There are pros and cons to both, says Gary Symington, president of Debt-Free America. Canceling the card right away may drop you five points on your credit score, he says, while opening up your credit limit by keeping the card "may drop you 10, 15, even 20 points."

You'll also need to pace yourself: Closing more than one or two credit cards a month can raise red flags on your credit report, says Julie Zachariason, counseling supervisor for LSS Financial Counseling Service based in Duluth, Minn.

On the other hand, if the card isn't costing you anything out of pocket and you don't already have too many credit cards, you might want to keep the account open as a backup, says Hendricks.


This story ran on on April 10, 2008.