Lucrative airline credit card offers on upswing
It wasn't whiskey, or perfume, or headphones that they were hawking, but rather the airlines' co-branded Visa credit card with Bank of America. It's the first time in my extensive travels that I've been subject to such a sales pitch.
After plugging their captive audience on the merits of the card -- a free flight upon approval, along with a $99 round-trip companion voucher on each yearly anniversary, both for use on Alaska, or one of 15 partner airlines -- attendants worked the aisles handing out application forms.
The attendants' names and airline codes were stamped on each lengthy fold-out brochure. The offer sounded promising at first -- until I waded through panel after panel of fine print.
To qualify for a free ticket upon approval, in addition to the companion vouchers, a card holder must apply for the option with the highest annual fee, clocking in at a hefty $75. The interest rate on purchases for the Visa Signature option is 12.74%, with rates escalating for cards with lower annual fees -- and lesser incentives for signing up.
Alaska Airlines isn't the only carrier ramping up advertising for its credit card. United recently ran ads in major newspapers touting its Mileage Plus Visa card with Chase Bank and offering a free United flight -- after a qualifying first purchase of $250. The carrier also surprised frequent fliers by marketing its card heavily -- on National Public Radio.
"It's the first time I've heard a credit card being touted on National Public Radio," said Tim Winship, co-author of "Mileage Pro --The Insider's Guide to Frequent Flier Programs." "And it wasn't just any credit card, it's the United Mileage Plus credit card."
Credit experts said that there aren't necessarily more airline credit card offers out there, but that as the economy improves and travelers return to the skies carriers and their bank partners are looking to solidify their links with their best frequent fliers.
They are also pushing hard to sign on customers with stable household incomes who are less likely to default.
"From the standpoint of a credit card issuer, this is an extremely desirable demographic," said Winship. "These ads are obviously meant to increase card membership, but they're also meant to sort of give current card holders that much more reason to stay with the cards."
For example, Delta and American Express recently issued a SkyMiles card that exempts holders from fees for their first checked bag. Even Winship admitted that he also fell for a recent Visa credit card offer from British Airways and Chase Bank, despite the fact that he makes a point of keeping only one or two credit cards in his wallet.
The offer allowed card holders to qualify for 100,000 miles for signing up -- the equivalent of two round-trip coach tickets from North America to London -- with a 50,000 bonus when the card was issued and then a second 50,000 incentive if the user charged $2,000 in the first three months, Winship said.
"It was, as far as I can recall, the most lucrative such credit card incentive, maybe ever, that I was aware of," he said.
Credit experts attributed the burst in advertising for airline credit cards, as well as generic credit cards that use airline miles as incentives, to a push by banks to earn more cash following the recession and new credit card legislation that's curbed earnings on late fees and finance income.
"These are higher margin products for them," said Ben Woolsey, director of marketing and consumer research at creditcards.com, a site where consumers can comparison shop various credit card offers.
"Most carry an annual fee, especially those in partnership with airlines, and also have much higher interest rates," he said. "They also charge the merchant that accepts these card a higher interchange rate, so they are much more likely to generate revenue for the banks."
Woolsey advised that customers interested in these cards not apply for an airline card if they carry a balance month to month. People who travel frequently for business, on the other hand, and can take advantage of airline travel partners like rental car companies and hotels -- thus racking up miles quickly -- could justify paying higher annual fees, he said.