Sunday, 23 April, 2006

Are "rewards" credit cards worth the trouble?

Several years ago Debra got a Capital One Master Card--one of those credit cards that gives you "miles" or "points" for every purchase.  Two years ago I finally succumbed and got a Capital One credit card myself.  That took some convincing, as I had been very happy with the Choice Visa that I'd had for 15 years.  But Capital One was offering "one point per dollar," which works out to a 1% rebate on all purchases.  It doesn't sound like much until you save up the miles and redeem them at the end of a year.  It's almost like free money.

In any event, the fun starts when we try to redeem these miles for something.  On the trip to Harlingen, we used Debra's credit card for the hotel stays in Kenedy and Kingsville, and my credit card for the hotel in Harlingen.  We had checked our miles balances and determined that we could redeem the miles for the hotel stays and have, in effect, a cost-free trip--at least as far as hotels were concerned.

We were planning another trip today and thought we'd clean up from the last trip before deciding how to pay for this one.  So to the telephones and the Web site, where we learned that things aren't as simple as we'd thought.

It turns out that Debra's "Miles One Rewards MasterCard" is good for cash back or redeeming miles for airline flights.  They changed the rules back in November and she can't use the miles to credit other purchases like I think she used to.  She can get cash back, but at 1/2 cent per mile.  She gets a full penny per mile if she buys air fare.

The card I got two years ago is a "Professional Visa" card.  Its rewards structure is quite different.  I can use miles to credit any previous charge, but at the rate of 0.75 cents per mile.  I found that very odd, because I can get cash back (a check in the mail) at the rate of 1 cent per mile.  If I want to credit a $200 hotel bill, it will cost me 26,600 miles.  But if I just redeem the miles for cash, I can get $250 for 25,000 miles.  Nutty.

I long resisted getting involved in these "rewards" cards and airline miles programs because I thought they were more trouble than they're worth.  For as little as I fly these days, the airline rewards programs are useless to me.  I'd be a bit more inclined to spend mental cycles on the programs if there was an easy way to combine miles.  For example, the first time I went to Japan I was on America West and then JAL on the way out.  The trip back was JAL and United (I think).  The second time it was United all the way.  I'd love to be able to combine those miles.  Absent the ability to combine miles, I ignore all of the airline programs with the exception of Southwest's Rapid Rewards.

The "rewards" credit cards are a little less clear-cut.  With all the rules and restrictions on Debra's card and on the business credit card, it's almost not worth having.  Sure, we can save up the miles and redeem them for cash every year or two, or perhaps book a flight.  But at 0.5%, it hardly seems worth the effort.  My "Professional Visa" account gives us 1% cash back on the first $20,000 of purchases each year, and 1.25% from $20,000 to $40,000.  It's tempting to cancel Debra's credit card and just put her on mine so that we can take full advantage of the 1% and other rewards.

One other thing to note:  I found that there are separate logins for rewards and for the credit card statements.  Why Capital One can't unify those is beyond me.

All told, I think my best bet is to redeem my miles for cash whenever I can and be done with it.  Even then we're skating dangerously close to the aggravation factor, where the mental pain of dealing with this silliness is not offset by the slight monetary gain.