How do airline credit cards work?
Airline credit cards are a result of collaboration between
credit card companies and different airlines. The concept of
airline credit cards works well for frequent travelers, who gain
in a number of ways by using airline credit cards.
Purchases made through the credit cards earn points for the
card holders; these points can be redeemed for free miles with
the airline, at a car wash, hotels, etc. Points are also earned
by flying with the chosen airline. The points are earned on the
basis of predetermined point levels. This helps fliers to
calculate the number points required to qualify for free travel.
It is important to be aware of the consequences of card
inactivity over a period of time and factors that can lead to
points expiration. There may also be a limit to the number of
points that can be accumulated in a year. Some airline credit
cards have a maximum limit of 100,000 points in a year and
points lapse if the card is not used for three years.
Airline credit cards work in the same way as credit cards but
may charge a slightly higher interest rate. Annual percentage
rate (APR) is used to measure the cost of credit. The methods
used for calculating the rate of interest are two cycle average
daily balance and average daily balance. The former, which
considers the average of the current and previous balance, works
out to be more expensive; this is something one should bear in
mind while selecting an airline credit card. Different airline
credit cards offer different rates; the rate of interest also
depends upon the card fees, bonus points, and the grace period.
A high rate of interest need not be a worry for card holders who
do not have a balance to be paid at the end of the month. All
the same, there are airline credit cards that offer 0% interest
on balance transfers for an introductory period and also charge
a low interest rate.
Airline credit cards have a preset spending limit that affects
the amount to be paid monthly; certain airline credit cards
offer a very high spending limit and even allow users to exceed
the limit, the excess amount being settled in the next month.
Airline credit cards can be of greater value if they are
compatible with other frequent-flyer programs as they enable
cardholders to use the points earned to the best possible
advantage. An annual fee is charged by most airline credit cards
in order to cover the costs of the benefits offered. Cash
advances may also incur a fee, which can have a minimum value of
$5 and can go up to $50, depending upon the credit card company
and the advance taken.