Credit cards can be expensive, but when used smartly, they offer cardholders significant benefits. Take air miles cards, which offer people the chance to receive free air tickets in return for making everyday purchases.
Not just that, many air miles cards offer a host of additional benefits such as free travel insurance, departure lounge access, pickup and drop-off service between the airport and your home or hotel, as well as cashback on overseas purchases, and even fast-tracked membership to higher tiers of frequent flyer programmes.
So, provided that the cardholder pays the balance off in full each month, credit cards present a good deal for the cardholder, particularly in this part of the world, where many residents are expats. But with more than 100 air miles credit cards on offer in the UAE, how do you select the best one?
There are a number of considerations that can help you make the right decision.
Some factors will already be decided for you, as depending on your monthly salary, you will be eligible for certain cards.
From the air miles cards you have access to, the first thing to consider is which airline you fly with most often. Experts say there are two options here — either pick a frequent flyer programme with multiple airline partners so as not to narrow your choices, or sign up for one that is linked to the airline you use the most, which is likely to be Etihad if you live in Abu Dhabi, or Emirates if you are in Dubai.
Count your rewards
The only issue with that is it does not narrow the options significantly, as there are dozens of cards tied to each airline. But one way to narrow the choices is to consider the number of rewards you receive, as not all cards give the same rewards for a fixed spend.
“Check the conversion rate of rewards earned on spend, i.e. how many miles you get per dirham spent. Or the other way around, which is how much you need to spend on a card to earn one mile,” says Preeti H. Bhambri, Founder and CEO of Moneycamel.com
And do not get wowed by attractive air miles credit card ads, warns Ankita Singh, Content Manager at Souqalmal.com, as two different credit cards offering one mile per dollar spent do not necessarily offer the same value. “Check how much these miles are worth, and how many miles will actually get you that free flight,” she adds.
Also check the card terms. Some cards do not offer miles on expenses such as utility bill payments. Some purchases offer more miles with international spend typically earning more miles than local, say experts. Some cards offer more miles if the monthly spend is above a certain threshold. It is important to calculate how much you think you may spend on the card to work out which one suits your lifestyle.
Look for cards that offer a sign-up bonus in the form of a lump sum of air miles. This gets you a head start on the free flight you are aiming for.
“And use your air miles while you can,” adds Singh. “Many cardholders are not aware that air miles have an expiry date under most air miles programmes, usually valid for up to three years.”
Experts also suggest considering upgrades. “Sometimes you get the best value for your miles on upgrades,” says Singh.
For example, it may be more economical to upgrade to business class after buying an economy ticket, or even at the time of boarding versus purchasing the business ticket first.
Some experts say that once you choose the best credit card, you should put all, or at least most, of your spending on your card to maximise the miles you receive, and keep a better track of your spending, which is hard to do if you only use cash.
Use them wisely
“Large expenses such as school fees, house maintenance fees, car servicing charges and other big-value purchases should be made on the card, of course on the basis that the card bill is settled in full at the end of the month,” explains Bhambri.
Be careful when it comes to balance transfers. Experts warn that you will probably not receive air miles on balances transferred to the card, although some cards do run special offers on air miles for balance transfers.
The most important consideration of all — the costs. Take into account the annual fees versus the estimated annual savings with your air miles, says Singh. Some air miles cards come with annual fees of Dh3,000.
“Also, make sure you pay the monthly bills by the due date, otherwise hefty interest payments and late payment fees will override the cost savings on air miles by a huge margin,” she adds.