|by Mr Credit Card|
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.
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).