How to save money using airline credit cards

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If you're a frequent traveller, or are keen to start exploring the world, it's worth considering applying for an airline credit card because there could be some savings in it for you.

In return for using the card for everyday spending, you'll earn frequent flyer 'points' that can slash the cost of flights worldwide. But can these reward cards really save you money? In this article, we explore the pros and cons so you can decide whether an airline credit card is right for you.

How do airline credit cards work?

An airline credit card gives you 'air mile points' according to how much you spend. You can use the card to buy pretty much anything – as long as the particular retailer accepts the card. Lots of these cards are linked to American Express (Amex) which is not accepted everywhere - so it's worth checking with retailers before you go to purchase something so you're not stuck in a sticky situation.

Once you've earned enough 'points', you can swap them for tickets or flight upgrades, although you'll still need to pay taxes and charges. Some schemes let you swap airmiles for hotels, cruises, travel insurance and access to airport lounges.

Most reward schemes are limited to one airline, but there are some cards that let you convert 'points' into 'air miles' for several different companies.

How much money can I save?

There's only really savings to be made for people who spend on credit cards a lot, and to get any benefit you'll usually need to pay off the full balance every month otherwise the higher interest rates on these cards will cancel out any savings you make.

The amount of 'points' you get per pound varies according to the credit card provider. Rewards typically range from 0.75 miles for every £1 you spend through to 1.5 miles for every £1 you spend. Don't just automatically opt for the most generous one, though, because the highest-earning cards tend to have large fees.

Some schemes offer generous introductory bonuses, enabling you to earn extra 'points' during the first few months of holding the card.

British Airway's Amex card, for example, is currently offering an introductory bonus of 5,000 Avios 'points' when you spend £1,000 in your first three months.

What are the drawbacks?

If you don't think you'll be able to pay off your card every month, then maybe these cards aren't for you.

This is because you'll have to pay interest of around 22.9% on the balance and may be charged fees for late payments. These could end up costing more than your 'air miles' are worth – and harm your credit rating.

To avoid being charged interest and late fees, you can set up a direct debit to pay off your card balance every month.

It's important to realise that you need to spend enough money to accumulate enough 'air miles' for a flight. However, this doesn't mean you should buy things you don't need. It's better to limit yourself to spending the amount of money you normally would.

Some cards charge high annual fees in exchange for giving you extra 'points' or bonuses. These cards are only really suited to high spenders who can earn enough air miles to warrant the fee.

It might sound obvious, but airmiles credit cards are only worth it if you actually use the 'air miles'. Points have an expiry date and there might be restrictions on which flights you can use them on.

What is the verdict?

If you're a frequent flyer who spends a reasonable amount of money on everyday purchases, then an airline credit card can be a great way of reducing the cost of flights. This is particularly the case if you fly long-haul – you have to pay for taxes and fees separately, so the savings on cheaper short flights can sometimes be negligible.

Make sure you do your homework before applying, as every card differs in what you can use your points for, how many 'points' you earn, and any charges levied.

Using a comparison site such as uSwitch can help you to decide which card is best for you.