Many people bank their miles over several years with the hope of getting tickets for their dream vacation. But the best strategy depends on whether you earn your miles through frequent flying or frequent spending. If you are a frequent traveler, you'll want to choose a specific airline credit card that augments the miles you earn on the routes and carriers you regularly fly. If you accumulate miles through spending, you might be better off with a card that gives you cash back so you can buy your own tickets without restrictions. Or get a general points card that lets you convert points to airline tickets.
Airline cards allow you to combine points with miles you've earned through their frequent-flyer programs, and most offer 25,000 to 35,000 points up front—enough, they say, for a round trip. But if you sign up for the free miles and then close the account, your credit score could be adversely affected. And bear in mind these "free flights" might not be so free.
"If you have 25,000 miles from an airline you can get a restricted domestic coach ticket, but you are up against capacity controls imposed by the airline," says Tim Winship, publisher of FrequentFlier.com. "They allocate a limited number of seats for rewards use." So you might have to use more miles, take a red-eye, or travel on a different day to get to your desired destination. Winship says an unrestricted ticket might cost you up to 50,000 miles.
On the other hand, 25,000 points on a bank credit card is enough for a round-trip coach flight, and you can choose from dozens of airlines without capacity restrictions. The one restriction is that you must book your flight 14 to 21 days in advance. Some American Express cards let you combine points with frequent-flyer miles, which can help you reach your goal quicker.
The AmEx Starwood Preferred Guest card is a good hotel/air card if you often stay at Sheraton, Westin, W, and others in the Starwood chain of 940 hotels. You'll earn one point per $1 spent on eligible everyday purchases and double points at Starwood hotels. The 10,000 points you earn with your first purchase is enough for three free nights with some restrictions. The card also lets you transfer miles to more than 30 frequent-flyer programs. And, unlike some AmEx cards, there's no fee for transferring points. You also get an extra 5,000 points for every 20,000 you transfer. The $45 annual fee is waived for the first year. If you stay at Hilton Hotels, take a look at the AmEx Hilton HHonors or Citi Hilton HHonors Visa.
If you're loyal to a certain retailer, see if it has a credit card with a good rewards program. Many retailers offer cobranded Visa, MasterCard, or AmEx cards that let you earn rewards for all your purchases and give you a sign-up discount and access to special sales. Retailer cards carry notoriously high interest rates, so they aren't suitable for people who carry a balance.
The Amazon.com Rewards Visa card, for example, has no annual fee and pays $30 back on your first purchase; 3 points for every $1 spent on Amazon.com; 2 points for every $1 spent at gas stations, restaurants, and drugstores; and 1 point for every other $1 spent. Points are unlimited, never expire, and can be converted to cash.