Credit Card Miles Explained: How They Work and What You Need To Know

Credit Card Miles Explained: How They Work and What You Need To Know

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Airline miles, sometimes referred to as frequent flyer miles, can be used to book free flights anywhere in the world. The miles consumers earn through their airline co-branded credit cards work very similarly — both in how they are accumulated and how they are used. However, when you earn miles through a credit card, as opposed to earning them via the traditional route, there are some nuances that will change how your frequent flyer account operates.

How Credit Card Miles Work

There are two sides to credit card miles that are equally important to understanding how they work — that is how they're earned and how they're redeemed. In short, earning miles through a credit card allows you to expand the number of ways you can get your hands on frequent flyer miles, as well as help you hold onto them for longer. When it comes to actually using your miles, the process is somewhat disconnected from the credit card, since all your miles are posted to your frequent flyer account and not your bank account.

How You Earn Miles With Credit Cards

Whenever you use an airline co-branded credit card to make any sort of purchase, you will earn miles. Those miles are then posted to the primary account holder's frequent flyer account. Just like with ordinary credit cards, miles are awarded based on purchases of groceries, gas, and everything else you can charge to your card. Depending on the card you have in your wallet, you may earn these miles at different rates in different categories. You can also sometimes earn extra miles through sign-up bonuses offered by the cards. Know that purchases will be the only transaction that earns miles — cash advances and balance transfers will not. There are just a handful of exceptions to this.

In some cases, it can take between 8 to 10 weeks for the miles you earn through your credit card to reach the account.

The miles you earn through credit card purchases are added on top of any base miles you may already be earning from the airline. For example, purchasing a Delta airline ticket will get you 5 miles per dollar. However, if you're using a Delta SkyMiles® Gold American Express Card (which has an annual fee of $95 that is waived for the first year)(See Rates & Fees) to pay for that purchase, you will get a total of 7 miles — 5 for buying the ticket, and an extra 2 for using the Delta-branded credit card.

Airline credit cards are special, in that some also provide cardholders with annual miles dividends. Depending on the card, you may receive between 6,000 and 9,000 extra miles each cardmember anniversary year.

How You Use Miles That You Earned Through A Credit Card

Once the miles are posted to your account, you can trade them in for free flights. With most airlines, you will need to have enough miles to pay for the entire ticket. With the exception of a few programs, you cannot combine cash plus miles. The exact number of miles needed for a free flight will depend on the airline you fly with, the destination, and your cabin type. You can read our in-depth guide on using miles to pay for flights here.

Since the miles you earn through your credit card are all applied to your frequent flyer account, all you have to do to actually use them is to log into that account. You will then need to search for a flight like you would normally, except switch to "miles" as the currency.

When you go to book a flight and wish to use the miles you earned through a credit card, make sure you select the 'miles' option before you search. This will look a little different for each airline. The example above is taken from the American Airlines site.

When using your miles to pay for flights, one of the most important metrics to keep in mind is mile value. That can be defined as the number of miles needed for a ticket, divided by total dollar value of that ticket. The average value of a mile is around $0.01, though sometimes you can have significantly better returns if you shop around enough. Certain airlines also have higher average mile values than others. Before you go to redeem the miles you earned on a flight, make sure to check what kind of point value you'll be getting. If it's significantly lower than normal, we recommend searching for a better deal.

The Average Value of Airline Miles

Program

Value
Alaska Mileage Plan$0.019
American AAdvantage$0.013 - $0.015
Avianca Lifemiles$0.014
British Airways Executive Club$0.015
Cathay Pacific Asia Miles$0.01
Delta SkyMiles$0.006 - $0.05
Etihad Guest$0.013
JetBlue TrueBlue$0.016
Korean Air SkyPass$0.01
Singapore Airlines KrisFlyer$0.015
Southwest Rapid Rewards$0.017
United MileagePlus$0.012 - $0.015
Virgin America Elevate$0.02
Virgin Atlantic Flying Club$0.01

The information related to Southwest has been collected by ValuePenguin and has not been reviewed or provided by the issuer of this card prior to publication.

Credit Card Miles vs Points: What's The Difference?

Though some credit cards say they earn their users "miles", in reality these function more like regular reward points. If a credit card isn't co-branded with a specific airline, you can be safe in assuming its miles are essentially points. Functionally, the difference between points and miles is quite substantial, both in terms of how you pay for flights and what types of costs can be covered.

Points (or points disguised as miles) are usually used to erase purchases of your card statement. That means you have to make a travel purchase, as you would normally, and the charge can be removed at a later date. Regular miles, on the other hand, are used to pay for a flight without the need to involve your credit card. This can be useful for anyone who doesn't wish to use up their credit line with a purchase that will appear there temporarily.

Lastly, it's worth pointing out that ordinary miles cannot be used to pay for international taxes and fuel surcharges. When you fly into some specific countries, their taxes may make it so you are slapped with a heavy fee — sometimes hundreds of dollars. Since points erase any travel-related purchases on your credit card, they can be used to wipe out the entire bill — taxes included.

Joe Resendiz

Joe Resendiz is a former investment banking analyst for Goldman Sachs, where he covered public sector and infrastructure financing. During his time on Wall Street, Joe worked closely with the debt capital markets team, which allowed him to gain unique insights into the credit market. Joe is currently a research analyst who covers credit cards and the payments industry. He earned a bachelor’s degree from the University of Texas at Austin, where he majored in finance.

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How We Calculate Rewards: ValuePenguin calculates the value of rewards by estimating the dollar value of any points, miles or bonuses earned using the card less any associated annual fees. These estimates here are ValuePenguin's alone, not those of the card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer.

Example of how we calculate the rewards rates: When redeemed for travel through Ultimate Rewards, Chase Sapphire Preferred points are worth $0.0125 each. The card awards 2 points on travel and dining and 1 point on everything else. Therefore, we say the card has a 2.5% rewards rate on dining and travel (2 x $0.0125) and a 1.25% rewards rate on everything else (1 x $0.0125).

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