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The headline of the May 1988 issue of InsideFlyer read, “United’s Frequent Flyer Bombshell.” Flash forward to May 2006 and the headline still might read the same. But what a difference 18 years makes. At that time United was creating a new direction for Mileage Plus with the introduction of expiring miles, though mitigating that change with new lower awards for only 20,000 miles (precursor to today’s 25,000-mile award). Well, United has dropped another bombshell for Mileage Plus called Mileage Plus Choices, and this time the bombshell just might portray a general directional shift on how these programs look at reward redemption.

In this story, we’ll take a look at the benefits this new program offers Mileage Plus members, as well as tips on how to use the program, and take a look at how this program came about and where it fits into defining what may possibly be a trend for other programs. Regardless, this is in our opinion the most revolutionary change since the bombshell in 1988 for United’s Mileage Plus program, and frankly, as things may turn out, revolutionary for the rest of the industry as well.

But before we get carried away with advice on how to use this new benefit for Mileage Plus members, let’s take a look at where this might have come from.

Essentially it has two parents-the Delta Air Lines SkyPoints credit card and the Air New Zealand Airpoints award redemption program (And, to be fair, on the pure award redemption side in which members can use their miles as money to purchase airline tickets, GlobalPass, since it’s transformation from LatinPass has had some success with this model over the past three years).

But to compare apples and other forms of apples to each other, let’s take a look at what we believe to be the parent of this particular program. Enter the Delta Air Lines SkyPoints credit card. We’ve written about it upon its launch and in fact, in the Jan. 2006 issue of InsideFlyer, we had this to say about the SkyPoints card: “Best Idea Today: SkyPoints credit card from American Express. OK, we do beat up on SkyMiles from time to time but this new credit card product does have some promise, since it easily checkmates some of the challenge by CapitalOne, in that members can earn no-blackout date award travel and leverage their spending for real dollar savings against airfares they shop for.”

It was either too early, or either Delta or American Express had the vision to push that product further, since it has languished from much public view. While it has a back door relationship with the Delta SkyMiles program, at first it was an extremely distant mention and the card was not initially even featured or mentioned on the Delta.com Web site, only the American Express Web site.

The details of that program are:

An interesting thing has happened in recent years with regard to frequent flyer programs — their partners have become the star of the show.

More to the point, the credit cards have walked to center stage, demanded the attention of the spotlight, and belted out a rousing rendition of “A Star is Born.”

While demand for travel has remained sluggish over the past 33 months (though there are indications it is picking up again, and flights are returning to full capacity), and the low-cost carriers have experienced unprecedented success in luring “frequent flyers” away from the majors, affinity credit card spending has continued to grow. And with the introduction and increased popularity of mileage-earning debit cards, frequent buying has replaced frequent flying as the number one way to earn miles.

That’s right. More miles are now earned through credit and debit card purchases than through actual butt-in-seat flying (this doesn’t include double and triple bonus offers, only actual miles flown).

Today, mile for mile, nothing beats affinity cards.

While this dynamic is likely temporary, and miles earned through card transactions will once again fall to the number two position as travel again booms in the coming years, it’s an event worth noting nonetheless.

There are several factors that have contributed to a surge in credit and debit card mileage earning. Not the least of which, but perhaps the oddest, is the aggressive marketing strategy adopted by many of the card companies to align themselves with airlines facing, or fully embroiled in, bankruptcy.

Strange as it may seem, the financially troubled airlines are often those offering the best card deals. BankOne and United Mileage Plus have been known to offer double miles on all purchases, Air Canada continues to announce new credit card partners, and even US Airways Dividend Miles and Bank of America have partnered to create a new value enrichment offer. Hardly what you might surmise would be “business as usual” for airlines in bankruptcy.

The truth is, this represents good income for the airlines, and banks are only too happy to tap into the ever-spending pool of frequent flyers.

And why wouldn’t they be? Statistics show that Americans are using their credit cards more than ever. In fact, last year Americans paid $50.6 billion in household bills, including cable TV, home and cell phone, insurance and rent just with Visa branded cards. This is a 27 percent jump from the prior year and more than double the volume in 2000.

You better believe Americans aren’t flying twice as much as they were in 2000.

Remarkably, nearly 60 percent of all credit card spending in the U.S. is related to some sort of co-branded relationship, and frequent flyer cards lead that group. That is big, big business, for all parties involved.

To further attract frequent flyers, the banks are pulling out all the stops. Over the past two years, you can bet money that almost every member who has signed up for an affinity credit card has been enticed by, and has received, a lucrative enrollment bonus. These bonuses typically range between 5,000 and 10,000 miles, with some reaching as high as 30,000 miles — all for just acquiring the credit card.

To put this in perspective, remember most elite-level programs for actual frequent flyers begin at 25,000 miles.

It is estimated that, even among the elite group of frequent flyers, greater than half earn more miles as a result of credit card spend than they do by flying. And these are the people who fly all the time. Among the infrequent flyer, more and more are signing up for the Capital One type “travel cards.”

Only time will tell whether mileage earned through the use of credit/debit cards will remain the number one way to earn miles, but one thing is certain, this form of mileage accumulation is changing the industry in exciting and unexpected ways.

Diners Club and MasterCard Pursue Alliance
Recently, the loyalty industry witnessed the birth of a different type of alliance — a credit card alliance.

Diners Club and MasterCard announced they would join forces, allowing Diners Club cards issued in the United States and Canada to be reissued with the MasterCard brand in order to function as MasterCard cards. The proposed alliance would immediately and drastically enhance merchant acceptance for Diners Club cardholders.

While Diners Club has traditionally been perceived as a Travel & Entertainment card, it has worked very hard in recent years to dispel that image and bring the card into the mainstream. Despite these efforts though, Diners Club still runs a distant fourth in merchant acceptance, behind Visa, MasterCard and American Express. But, with Diners Club recently taking home its seventh consecutive Freddie Award for Best Affinity Credit Card, it would appear merchants are the only group of North Americans who have failed to become infatuated with this card.

Clearly, the Diners Club Club Rewards program is recognized as a top-of-the-line loyalty program. Key to that success has been its friendly relationships with virtually every airline and hotel loyalty program, which allows members unparalleled conversion opportunities. And, Diners Club has mastered the art of promotion. With deals like its annual conversion bonus that effectively doubles the rate at which Club Rewards points can be transferred into British Airways Executive Club miles, Diners Club has gained countless converts.

If this alliance goes through (and we’re guessing it would not have been announced unless it was a nearly done deal), Diners Club, along with its Club Rewards program, could easily become the ultimate credit card for members of all loyalty programs. With one fell swoop, Diners Club cards (branded with the MasterCard logo, of course) would be accepted at the more than 22 million merchant locations worldwide where MasterCard credit cards are accepted.

The question is: Will this alliance turn out to be everything it appears? Will frequent flyers be able to use their Diners Club cards with a MasterCard logo at any merchant location that accepts MasterCard, bank Club Rewards points, and move those points to virtually any airline or hotel currency at the current exchange rates?

The answer remains up in the air. Many credit cards maintain proprietary position as the primary card associated with various frequent flyer programs, and while Diners Club exists as a partner (grandfathered in from the mid-80s when it was the first to become involved with frequent flyer programs), the inclusion of a MasterCard logo on the card will almost certainly give rise to some back room discussions. Namely, we would expect other MasterCard branded partners to lobby for a better per mile rate, and perhaps even propose that Diners Club no longer be allowed to continue as a partner, as it is arguably not the same ‘brand’ anymore.

For selfish reasons, we’d like to see this alliance work because it’s sure to give rise to a new round of credit card enhancements. You can be sure that, if this alliance does proceed as planned, another former Travel & Entertainment card, namely American Express, is not going to sit idly by and watch its market share erode — especially in the loyalty credit card arena. In fact, American Express has won a few legal battles in recent times that may lead to the development of a MasterCard- or Visa-branded AmEx card.

Just as has happened among the airlines, the tangled web of alliances is now apparently spinning its way through credit cards.

Diners Club International, Diners Club North America and MasterCard are currently working with all the necessary parties to reach a final agreement, which includes determining project timing, logistics, and other details of implementation. We’ll keep you updated on this monumental process.

Debit Cards
Over the past two years, nearly every frequent flyer program has introduced a debit card that earns miles. Though most of these types of cards earn miles at a rate 50-percent less than their credit card siblings, and most members are still unaware of the existence of mileage-earning debit cards, this area is growing rapidly.

Truth is, with bank consolidation and alliances becoming the norm in the banking industry, these institutions have found that debit cards linked to frequent flyer programs are an expensive yet affordable cost of business.

Ann Ardizzone, managing director of the Alaska Airlines Mileage Plan program, sees even more reasons behind the growth of debit cards, “… for the bank (debit cards) offer a perfect audience to move over to the credit card at some point in the future. Also, the lure of miles is a large carrot to get customer to transact online — both the airline and the bank have used miles to this advantage. From the bank perspective, miles help lock in customer loyalty.”

While the focus remains primarily on the competitive nature of credit card programs, debit cards are becoming an increasingly important player. The banks have plenty of uses for money sitting in checking accounts, and most airline programs see the value in offering a companion debit product as just one more loyalty enhancement.

And these cards seem to carry a high value with members. In this year’s Freddie Awards, two of the top 11 affinity credit cards were debit cards, with the Citi/AAdvantage MasterCard debit card actually receiving a higher rating from voters than the Citi/AAdvantage credit card product. And some even offer the same 1:1 earning ability of a mileage-earning credit card — Citi/AAdvantage and Chase/OnePass both fit this description (both require a small annual fee for the privilege of earning miles, but this hasn’t detracted from their popularity).

If you’re still not convinced that this debit card phenomenon is for real, consider this: according to Visa, global transaction volume for Visa debit cards edged out credit card volume in 2003. Debit card transaction volume reached $1.48 trillion, up 17 percent from the previous year, while Visa credit card transaction volume worldwide increased five percent to $1.45 trillion. Even when confined to the U.S., debit card transactions exceed those of credit cards, though credit cards still edge out debit cards in terms of sales volume. Just barely though. Forty one percent of all sales volume was attributed to debit cards.

Only two things stand in the way of debit cards surpassing credit cards in the hearts and wallets of mileage earners. One is that most programs now offer low or no annual fees for their cards, and the margin may not be there in the long term if airlines raise the price of miles they sell to the banks.

Two is the PIN vs. signature debate. When making a transaction with a debit card, the owner has the option of signing for the transaction, as they would with a credit card, or providing a PIN. While this might not seem like a big deal, it’s a very big deal to the bank and the merchant. A signed transaction costs the merchant the same as a credit card transaction (and, consequently, provides a large profit to the credit card issuer), whereas the PIN transaction costs merchants significantly less. If merchants get their way, and are able to turn the vast majority of debit card transactions into PIN transactions, these cards might merely become a short-term extension of the current credit card partners.

If there is one credit card partner that hopes this trend does not take off, it is probably American Express. Without physical locations for banking services, it more than any other financial institution, is at a disadvantage in this product offering.

Among the hotel programs, there’s less attention paid to debit cards with rewards. A spokesperson for Marriott Rewards commented, “Debit cards do not provide enough value to the customer. It is harder for them to earn substantial amounts of points because of lower spending on them.”

What’s Ahead
So what’s ahead for credit cards?

Well, first of all, we don’t expect banks to get a big head and opt out of frequent flyer programs. The fact of the matter is, the banks simply can’t supply travel awards at a lower cost, and the travel awards are what the public wants. No, these partners are here for the long run.

What you will see are more regional banking/credit card partners. A good example of this is the KeyBank/Continental OnePass credit card relationship. While Chase has been Continental’s long-time credit card partner, there were holes in the coverage where OnePass has members, and Chase did not have a presence.

You can also expect to see a new round of innovations, including increased value propositions and targeted bonuses. Some of this will expand on the concept of earning double miles at select merchants, and some will more than likely function much like recent elite program bonuses offered by the airlines — spend more than last year during a defined period of time and you will earn a bonus.

In addition, you’ll see more international airlines introduce credit cards to the American audience. In the last year, both Air Canada and Lufthansa’s frequent flyer program added credit card offers for members of those programs living here in the U.S.

And last but not least, keep your eye out for perhaps one of the most exciting ideas we’ve seen related to frequent flyer miles and credit cards: Zevez.com.

This recent startup is gaining customers and good buzz by helping companies turn their accounts payables into rewards. Never before has there been a working business model like this one, and given the fact that credit card companies are constantly trying to turn every transaction that can be paid by check into a transaction that can be paid with a credit card, there’s a lot to be said about this concept.

Confused by the dozens of credit card choices available to you? Disregard all the touting that you see in ads — these are too general and not targeted to your specific mileage or points needs. Your choice must be specifically tailored to what’s best for you.

Choosing a credit card can be daunting. Advertisements gush about “earning free travel” and “5,000-mile bonuses.” If you were to believe everything you hear and read, you would probably be convinced that there are dozens of credit cards, all touting great, yet similar, rewards. Upon closer inspection, however, you would find that not all credit cards are created equal. Most will satisfy your basic desire to earn bonus miles and points with each purchase, but it is a very, very rare credit card indeed that meets all of your demands when it comes to flexibility, acceptance, benefits and fees.

This past year has seen more changes in the credit card industry than the previous 15 years combined. From the introduction of debit cards that earn miles and small business cards that offer much more than bonus miles to the double miles promotions and the recent change by American Express to introduce new cards with rewards built in, the changes to the credit card landscape have been sweeping. Not to mention the ever-growing trend of bonus “branding” (witness the new free nights promotion that Hyatt Gold Passport offers in conjunction with MasterCard). Consequently, there’s never been a better time to audit your wallet and make sure you have the best plastic.

One of the most basic decisions every mileage-earning credit card owner must make is whether or not to choose a no-fee card. The arguments for and against fee-based cards generally take the following form: For — fees are necessary to compensate for maintaining rich bonus mile offers; Against — no-fee cards save you money by eliminating unneeded expenses.

The other basic decision faced when selecting a credit card is which type to choose — one that has a direct relationship with the program of your choice, or a banked credit card that offers you a choice of redemption possibilities (American Express Membership Rewards and Diners Club Rewards are the best examples of this second type).

But that’s just the beginning. Choosing the right card is a matter of weighing all of the available features and determining a balance that works best for your unique circumstances. Let’s look at some options available to you, and some of the industry’s recent trends.

Charge Cards — Banks
The staple of business travelers, the American Express card, was actually a latecomer to the world of miles and points. When frequent flyer programs were born in the 80s, the venerable Amex struggled as card holders said goodbye to their old standby and jumped to Visa and MasterCard for their 1-to-1 miles to dollars programs.

Enter Membership Rewards. Originally call Membership Miles, the program we now know as Membership Rewards was launched in 1991. By 1995, the credit card magnate had joined forces with Hilton to offer a card, and the following year it branded itself with Sheraton. The original Sheraton card is now the Starwood Preferred card. The first Delta SkyMiles Amex card was introduced in 1996, and later that year American Express introduced a gold card. By 1999 it brought on the platinum.

“The biggest trend we are seeing is consumers today are looking for value in all of their spending and financial transactions,” American Express spokeswoman Monica Beaupre said. “People want to spend wisely and so they are absolutely looking for credit cards that give them value and membership. The reward, or point (or mile) has become a sort of a currency, if you will.”

To help draw new card holders and to keep others from jumping ship in this highly competitive arena, American Express now offers two Membership Rewards points for every dollar spent at most stores. American Express Platinum Card users will also get this perk beginning Nov. 1. The double “bank” for the buck is good on everyday purchases at most grocery stores (not the big box club stores), gasoline stations, the post office, home improvement stores and even when paying some of your monthly bills.

“People just want more value. They are buying these things everyday and getting something in return. They think this is good and they like it,” Beaupre said. “Credit card companies have to keep abreast of the changes and trends if they want to compete.”

Diners Club, the happy result of a misplaced wallet at a business meal in 1949, has, since its inception, focused exclusively on the business traveler. Its Club Rewards program, started in 1984, was the first relationship-marketing program in which members were both recognized and rewarded for their loyalty. Today, members may convert points into miles with all frequent flyer and hotel loyalty programs.

Diners Club is a six-time Freddie Award winner for best affinity card, largely because of its flexibility and double redemption rates with some airlines.
Annual fees for the card have been rising steadily, to the chagrin of many members. Still, the customer loyalty to this (relatively) humble card is simply astounding. And now even Diners has evolved, offering a new Montage card with a revolving balance, as well as its traditional charge card.

While Diners Club Rewards invented the idea of a credit card ‘bank,’ allowing members to choose which frequent flyer program to convert their spending rewards into, both Club Rewards and American Express Membership Rewards get plenty of competition these days from hotel credit cards that allow a similar banking choice. Prominent among these are the Starwood Preferred Guest American Express card which has become the ‘hip’ choice among frequent flyer insiders — providing flexibility at a low (how’s free for the first year) annual fee.

Non-Affinity Cards
Some of you may remember our look at non-affinity cards from our November 1999 issue. For those who don’t, here’s our advice in a nutshell: Be careful. The value of miles earned on non-affinity cards is limited to the rewards offered by the credit card company itself — in other words, they are not transferable to any airline or hotel program, and as a result, cannot be pooled with miles earned by flying and generally cannot be used for upgrades. Familiar among these type of cards are those issued by Capital One, Wells Fargo, MBNA and even Citibank.

Another drawback to these types of cards is that most of these programs place a cap on what they’re willing to spend on free tickets. If the cost of a ticket exceeds their $500 cap, you may have to pick up the difference. Of course, many of these cards have no annual fee, which seems attractive on the surface. But again, the difference between their cap and the cost of the ticket may easily be larger than the annual fee for a true affinity card.

Finally, if you, like most hardcore frequent flyers, prefer upgrades and the perks associated with elite-status, you’re simply better off with a true frequent flyer or hotel rewards affinity card.

Debit Cards
Debit cards are a sound alternative for the consumer who either cannot qualify for a credit card or chooses to avoid using a credit card. The debit card bears a Visa or MasterCard logo and offers its holder the convenience of a credit card. Of course, the debit card subtracts money from your checking account and, therefore, allows you to spend only what you already have.

In 2001, financial institutions issued 157.9 million MasterCard and Visa debit cards, up from 135.8 million in 2000. With the staggering growth came market pressures, and with market pressures came rewards.

Continental partnered with Chase in 1999 to offer the first co-branded affinity debit card. Since then, the offers have come fast and furiously, and today there are at least 10 from which to choose. Alaska Airlines, American, Continental, Northwest and US Airways each offer at least one version.

Before jumping on the affinity debit card bandwagon, you must have an account with the issuing bank. You’ll want to know if that bank is appropriate for your needs. Are its terms and conditions acceptable? Are there local branches? And is it worth jumping through the appropriate hoops to start yet another checking account?

The most tangible drawback in terms of earning ability is that debit cards generally earn about half the miles of a credit card. Unless you’re willing to pay extra fees for a “premium” classification, you can expect to earn one mile for every two dollars spent. The Premium Citibank AA Debit card and the Chase Debit Preferred and Business cards all offer a full mile per dollar spent, but they’ll also set you back $65 a year in fees, not unlike a normal credit card.

Consider: If you spend $5,000 a year on your debit card and the base level of a flight award is 25,000 miles, it will take you 10 years to earn a free ticket. By that time, you’ll have paid $25 to $30 a year and that “free” ticket will have quietly cost you $250 to $300 dollars. However, most people using a debit card see it as the equivalent of writing a check and if you can earn miles for writing a check, you’re way ahead of the game.

Obviously, by itself, this hardly seems to be a deal. But if you’re earning miles by flying or other activities, the debit card may be just the thing to pad your mileage account.

Business Cards
With an eye toward the heavy spending potential of small-business owners, a number of banks have issued business cards specifically geared to that market.

“Clearly we want to increase the spend, just like the user wants to increase the rewards,” said Tom Kelly, a Chicago spokesman for Bank One.

Of course, to get a business card you’ll need to qualify. Most programs restrict membership to business owners with sales and employees under a set amount.

The real advantage here is that you are given the option of earning miles individually, or as a company. In other words, you may opt to have the employee cardholder bank miles into his or her own account, or choose to have all miles on the account pooled into a single mileage account. Mileage Plus, for example, recently released its Platinum Business Visa, which allows for separate or collective pooling of miles, and double miles on UAL purchases.

“It’s clearly an attractive reward, so we’re building on that platform, for products geared toward the heavy users,” Kelly said. And Mileage Plus isn’t alone. Alaska, America West, American, Continental, Delta, Northwest, US Airways and Six Continents Priority Club all offer business card options, generally with higher fees and interest rates, but with rich enrollment bonuses and high earning power.

Fee-Free Cards
Be wary of the temptations of “fee-free” cards. They have their benefits, but unless you’re careful you’ll spend a heck of a lot more on interest than any potential fee.

Take, for instance, a promotion being sent to select Northwest WorldPerks members. The deal states: “If you apply by the end of the month for the no annual fee card, you’ll get a 3,000-mile enrollment bonus. And the first time you use the card for qualifying purchases, you’ll get an additional 2,000 miles.”

So now we’re up to a minimum of 5,000 miles for signing up and charging, oh, let’s say, a tank of gasoline — with a 1-to-2 miles to dollars ratio. Sounds great, and upon further inspection it appears to get even better. The deal also states that “If you charge $2,000 on this new card by the end of December, you’ll earn another 2,000 miles.” Add that to the 1,000 miles you would get for making $2,000 in charges and you are up to 8,000 miles just for singing up, or roughly a third of your way to earning a free domestic ticket.

But before you break out the bubbly, you’ll want to be sure you can pay off that $2,000 and odd change you’ve racked up right away. This particular card offers an interest rate of 9.75 plus prime, currently 4.5 percent. At this APR it doesn’t take Alan Greenspan to see that, if you’re not careful, you could end up paying more in interest than you would have paid for the ticket itself.

Other Trends
Larger signup bonuses — In years past, the First USA Visa card from United Mileage Plus offered the typical 3,000-5,000 bonus miles for signups. But they and many others are getting very aggressive and now offer 15,000 bonus miles.

Anniversary bonuses — It used to be that this very nice compliment was only offered by the Alaska Mileage Plan credit card, but now you’ll find thousands of extra bonus miles come your way each and every year you continue with a card.

Free companion tickets — First introduced years ago by the American AAdvantage credit card, this feature is fast becoming a standard. Many savvy frequent flyers bank on this one benefit to save them money, since it no longer requires that you purchase a full-fare ticket to take along someone for free. The newer offers include most discount fare classes.

Elite benefits — That’s right, choose the right card and earn basic elite level benefits. While you’re not likely going to be at the Platinum level, just knowing you have an elite membership will often make award redemption easier for you. Both credit cards sponsored by the Hilton HHonors program come with Silver elite membership.

Spending bonus — There’s nothing more competitive today than an offer of bonus miles and points with a select set of merchants. Continental has double mile bonuses when cardholders use their Signature Visa or Platinum Visa or MasterCard at Lowe’s Home Improvement Warehouse, CVS/pharmacy, AT&T, Hertz, Macy’s, Bed Bath and Beyond, KB Toys, U.S. Postal Service, Best Buy and any bookstore. The addition of any bookstore is likely to be the next battle ground and, of course, Delta is most famous for double miles at similar merchants and for double and even triple miles for purchases during the weekend.

Partner bonuses — Earlier this year, the American AAdvantage Citibank card awarded cardholders a special 7,500-mile bonus for spending with a variety of AAdvantage partners.

Special benefits — There’s no better example of this than the American AAdvantage Citibank card. They have established a special award chart for cardholders entitling them to awards for only 20,000 miles. Granted only select cities apply and those cities change each quarter, but we have found this benefit to be one of the most valuable benefits of any card.

And finally, the most exciting new trend in many years — Credit card miles and points that count toward elite status. A few years back, the credit card for US Airways offered such a benefit, but the benefit was pulled after only one year. Well, it’s back. The new Platinum Business American Express card from Delta counts up to 10,000 miles earned from purchases toward re-qualification for elite. At $135 per year, the card is not inexpensive, however, when you consider that you won’t have to make any late-year mileage runs to Singapore to re-qualify for Medallion, it’s really cheap.

What’s Right For You?
The variety in affinity credit cards is enormous and is probably only matched by the diversity of frequent flyers. Your search for just the right card begins with a little self-examination: What kind of flyer are you?

The inveterate road warrior, who flies so often that you’ve forgotten that most toilets don’t flush blue? Or are you a Joe or Jane average, chained to the surly bonds of earth until that free ticket to the Bahamas comes through?

We spoke with some seasoned veterans of the credit card-miles game for their perspectives.

“I put as much as I can on credit card; I use Diners as much as possible,” says computer consultant and frequent traveler, 29-year-old Roger Lee of Dallas. But unlike 94 million other credit card holders in the U.S., Lee doesn’t carry a monthly balance.

Lee is partial to the Diners Club card because of the double redemption rate with British Airways: A simple half a tank of gas at $10 will get him 20 British Airways miles. Lee didn’t venture in the foray of charging for miles until about five years ago. His first card was with American Express for the Membership Rewards. He had one for personal use as well as a corporate card that he pooled into one account. He later opted to use Diners almost exclusively, and cancelled his American Express Platinum card because of fees.

To date, Lee has accumulated 2.4 million miles with three different programs. He estimated that about a fifth of the miles have been from using his credit card.

Casey Lanson’s odyssey into charging for miles began in 1994 when he charged a tank of gasoline on his Visa card. From that point, “The light sort of went on,” he says. Today the 59-year-old partner in a Tampa computer consulting business has some 11 million miles and points, largely for opting to pay with plastic over paper. Lanson has the system down, and calls collecting miles one of his hobbies.

“I consider it my travel 401K,” he says.

In the past four years, Lanson has charged two cars and a van so that he could earn miles and points for the $92,000 in vehicle purchases. Many car salesmen will try to steer the customer away from making such an exorbitant purchase on plastic, but as Lanson can attest, it can be done.

When Lanson charged a $56,000 Lexis four years ago, he bypassed the salesmen and went straight to the top to explain why he wanted to charge the luxury vehicle.

“I ended up with 56,000 AAdvantage Miles,” says Lanson.

Many dealers are leery of such transactions because of buyer-remorse rules that could leave the dealer out cold if the credit card company sides with the customer and stops payment for one reason or another. To be successful at charging for miles, Lanson says it must be a way of life. “You have to become almost a zealot.”

Lanson says many business owners have no idea of the miles and point earning potential that is out there, and he encourages those that seek his advice to double check with suppliers — anyone who is generally paid in cash — to see if they will take credit. Lanson also encourages people who can’t pay off their credit card bills in full each month to play it safe and not get caught up in the mile and point charging frenzy.

“Interest will kill you,” he says. “Go and buy the miles from the airlines — you’d be better off.”

Your own habits will determine the type of card that works for you. To assist your decision, let’s draw some generalizations — four profiles, if you will, which more or less cover the gamut.

The high-spending, high mileage type — Bill Gates meets Gulliver. These folks spend a great deal every year on travel. Whether it’s on their own dime or a generous company expense account, they rack up the bills. A high annual fee is usually not a problem here, largely because the mileage earned inevitably makes up for any outlay. For this type of traveler, earning caps are out — they’re ridiculous anyway. And since this traveler spends a lot of time and money on planes, it only makes sense to go with a program that gives you double miles on purchases made with the airline.

Most folks in this category have become obsessively good about paying off their balances in full every month, so interest rates are less of an issue. Almost any Platinum-level American Express card will fit the bill. Delta’s has the best enrollment incentive, offering a 15,000-mile bonus as well as double miles on ticket purchases. But don’t sell short the Diners Club card because, with an enrollment bonus of 12,000 miles plus all your options and cardmember benefits such as their Club Rewards Concierge, we’re talking the complete deal here.

If you do carry a balance, and interest rates become a concern, America West carries the FlightFund Visa Platinum: Double miles on ticket purchases, with an interest rate of just 11.74 percent. Priority Club’s Rewards Platinum Visa matches that rate (after a six-month period of just 2.9 percent) and may be more convenient for those outside the America West network.

The frugal traveler — These are folks who, by necessity, find themselves in the air often, but are watching every penny. The vast majority of this flyer’s mileage will be earned by traveling — a credit card will simply serve to pad the account.

This flyer needs maximum earning potential on travel purchases, and no earning cap. High annual fees are a concern here, as are high interest rates. When cash flow is limited, paying off the balance every month isn’t always possible, so many of these consumers are going to carry some revolving debt. Translation: watch the interest rates.

If interest rates are your sole criterion, the best ones out there in the non-platinum categories are the Alaska Mileage Plan Visa Gold at 11.74 percent; the Southwest Rapid Rewards Classic Visa at 13.4 percent and the Hilton HHonors Visa Signature at 12.74 percent (after a six-month period of 0 percent).

Naturally, the first two won’t help you much if you’re outside those carriers’ geographical networks. And the HHonors points to miles ratio (3:1) is hardly the most generous in the industry.

The high-spending earth-dweller — Either through good fortune or good business, this flyer deals with hefty credit card bills every month, but just doesn’t get off the ground that often. A free trip to Bermuda would be nice, but travel isn’t necessarily a priority.

Like most big spenders, these folks usually pay off their balances every month, so either charge or credit cards are feasible. And if you’re spending big, you don’t necessarily want to be limited in your earnings, so once again, caps are out. You’re also going to be on the lookout for programs that have multiple partners to increase your spending options. The American Express Membership Rewards program is great for this. Airline, retail and other partners are all vying for your points.

Joe six-pack — Earthbound in more ways than one. Expense report is not necessarily a part of your vocabulary. Still, you’ve got your eye on a trip to Ireland and wouldn’t mind doing it for free. You don’t foresee charging a new Maserati to a card, but you do buy gas and groceries now and then.

You want a low interest rate, a low annual fee and you feel no real need to earn double points on airline purchases because, frankly, you won’t be making many. Earning caps are not a problem and a high enrollment bonus would be nice.

Take a look at the United Mileage Plus Visa: It has a cap of 60,000 miles a year, but it does offer 15,000 bonus miles right off the top. It carries an interest rate of 14.65 percent — right about average for an affinity card. And Visa seems to be accepted more widely than American Express, though that gap is closing daily. If you feel comfortable with the acceptance rate of American Express in your daily routine, you could do much worse than the new Amex Green and Gold Rewards cards. With options like double points at grocery stores and gas stations, you may find that your earnings add up quickly. These cards are quite specifically designed for different types of consumers — if travel is your bag, go with the Preferred Rewards card. If merchandise is your goal, the standard Rewards card should suffice.

Of course, not everyone follows a set pattern. Is there a solid, all-purpose card out there?

If you listen to FlyerTalkers (and you probably should), there is. It’s the Starwood Preferred Guest American Express Card. It nets you 1,000 points for your first stay and 500 points thereafter. It offers one Starpoint for every dollar spent. There is no cap. And unlike their regular charge card, this co-branded baby allows you to carry a balance, if you wish. The secret to this card is the point to miles conversion if you spend big. Spend $20,000 annually and you’ll be able to convert that into 25,000 frequent flyer miles of almost any type.

To keep your bases covered, though, you may want to consider a Visa or MasterCard in addition to a charge card. To that end, an enormously popular card with frequent flyers, and something of a dark horse in its relative anonymity, is the Amtrak Guest Rewards card. There is no annual fee, it offers one-to-one credit on United, Continental and Midwest Express, there is a 25-day grace period and a relatively low interest rate of 12.99 percent. The only caveat is that miles will expire in three years if you don’t book on Amtrak, but you can get around that by transferring the miles into your non-expiring frequent flyer account.

A Word (or Two) of Warning
We’d be remiss not to mention some downsides. Even if you’re the most responsible spender on earth, there are restrictions that can sneak up on you.

For starters, look at spending or earning caps. You may be ready to spend the farm in a month to earn miles, only to find that your card maxes out at 10,000 miles a month. Or you’ve waited patiently for months for a double or even triple miles promotion, only to find that the minute you reach 30,000 miles the party’s over.

And then there’s you tumbleweeds who stay with a card only as long as it takes to get the enrollment bonus, then switch. Unless you do this right, you’re going to end up hurting your credit rating. Every time you apply for a card, the issuer will make an inquiry about your credit status. An inquiry will remain on your record for a year and issuers will become concerned if they see an unusually high number of inquiries on your report. More than 10 inquiries in a six-month period makes them think you’re desperate for credit, and therefore a high risk.

Beware also of the deadly lure to transfer balances from other accounts. Depending on your card of choice, this can either be great or a disaster — even when earning miles for it. Some cards will allow you to transfer existing balances from other cards and earn either one mile for each dollar transferred (with limits) or one mile for every two dollars you transfer. It’s easy and they even supply a ‘convenience’ check for you to use. Here’s the problem; these are usually considered cash advances and carry a very high premium. Paying the extra interest rate and fees may just make these the most expensive miles you have. Before doing this check to make sure it’s financially a good deal for you.

And perhaps most importantly, don’t let the lure of “free” miles get you in over your head.

“People go to extremes to earn air miles — they are some of the most popular cards,” says Daniel Ray, editor-in-chief of Bankrate.com, an Internet clearing house of information on financial rates and services.

From college tuition to taxes, the public has bought into this notion of getting more bang for the buck…er…charge. But Ray cautions that there is always the potential for disaster when making high credit card purchases. Despite, and in some cases because of, a tanking economy, consumers are not holding back when it comes to putting it on plastic. Analysts say the American public’s total indebtedness by the end of last year stood at $1.65 trillion.

A Final Word
In the final analysis, your choice is going to come down to just that — your choice. The variety of credit card options is so large that even once you narrow your priorities to interest rate, or earning ability, or any one of the numerous variables in the credit card game, you’ll still be left with more than one choice. For every new development or incentive in this particular card game — for every low fee, mileage bonus, or nifty logo — the market is competitive enough that dozens more similar developments or incentives are sure to follow.

And, just as with restaurants, airlines or hotels, much of your future behavior will be based on intangibles — most specifically the customer service you receive. For every user who swears by a particular card, you’re bound to find one who cancelled the same card for a perceived slight from a service department. Perhaps early in your career financial struggles with a particular card clouded your vision. Or perhaps a computer glitch led to an embarrassing decline. Who knows? Look at your options, make a choice and see how you’re treated.

In the end, that’s what’s most important.