The travel rewards market is one of the most crowded in the entirety of the credit card industry. Constantly changing signup bonus offers, rewards redemption systems, and reward unites also make it one of the most opaque. Those partaking in the market are nearly all chasing new revenue streams and co-branded cards are doubly used to retain customers.
The first layer of the card nexus is the credit card network. The major American and international networks include Visa, Mastercard, American Express, and Discover. The networks act as a system by which money flows from consumer to issuer, issuer to acquirer, and finally, acquirer to merchant.
Although Discover and Amex started out differently than Visa and Mastercard by having no issuing banks, they have evolved with time and are now more similar in their offerings. Amex does, however, issue their own cards in addition to separate issuing banks.
Issuing banks are the financial institutions that issue cards to cardholders. They are the ones that support the line of credit, decide on fees, interest rates, and penalties. They also handle the actual loan for each purchase.
Acquiring banks are the financial institutions through which merchants receive the funds for credit and charge card purchases. They send a batch of requests usually each day to the acquiring bank. The acquiring bank then goes through the card network to the issuing banks to request the funds. The card network clears the request between the issuing bank and the acquiring bank. After the acquiring bank receives the funds from the issuing bank, a payment, less fees is then issued to the merchant’s account.
Now for the fun part. The following is a short-form description of the major players in each network. Business cards are excluded from this list.
Issuing Bank: Chase
Cards: Freedom, Sapphire Preferred, Sapphire Reserve
These two cards are not cobranded and allow the holder to earn a proprietary Chase currency called Ultimate Reward points. These transfer at a 1:1 ratio to seven frequent flyer programs and four hotel rewards programs. Most of the programs are upper-scale although the inclusion of Southwest offers cardholders a slightly more cost effective option for using points. Chase also offers a shopping portal to earn points and an online booking platform. Optimal use of Chase Ultimate Rewards points has been deeply discussed and debated here, and here. Ultimate Rewards points are likely the highest and most flexible rewards currency available.
The Sapphire Preferred card has an annual fee of $95 that is waived for the first year. A 50,000 (current) point bonus comes into play after $4,000 of spend in the first three months. There is APR it inception.
If you decide to apply to Sapphire Preferred, please use this link. It gives me a referral bonus and helps keep this blog going.
*Note that the Freedom card only transfers into Ultimate Rewards points if the cardholder also has another Chase card that earns those points.
Issuing Bank: Chase
Cobrand: Various Airlines
Cards: Southwest Rapid Rewards Premier, United MileagePlus Explorer, United MileagePlus Club, British Airways Visa Signature
Each co-branded card earns miles in their respective frequent flyer programs. The bonuses differ between them, as do the fees and perks for the airlines. For example, the Explorer card offers a free checked bag, while the British Airways card offers three Avios per dollar spent on British Airways. These cards are mainly aimed either at frequent flyers, in order to compel them to spend more, or at those looking to become frequent flyers. The points are not nearly as flexible as Ultimate Rewards, but do provide some of the benefits of being a frequent flyer without the requisite flying.
Free checked bag and other common airline credit card perks. Many of the cards have fees around $95 per year. Most waive that fee for the first year. All have APR at introduction, currently.
Issuing Bank: Bank of America
Cards: Bankamericard Travel Rewards
The Bankamericard is Bank of America’s (BofA) unbranded line of credit cards. The Travel Rewards card works differently than most travel rewards systems. Cardholders earn points which are redeemable for travel credit at a rate of 1.5 points per dollar spent with a (current) bonus of 20,000 points after $1,000 in spend within the first 90 days. Travel credit is redeemed directly on the credit card statement itself. The points transfer at one cent to one point. 20,000 points is required to pay a $200 travel expense.
The card has no annual fee, and currently has no APR on purchases for 12 months. It should be noted, though that revolving debts hurts your credit score.
Issuing Bank: Bank of America
Cobrand: Various Airlines
Cards: Spirit Airlines, Amtrak Guest Rewards World Mastercard, Virgin Atlantic
Points are put directly into the frequent flyer accounts just like the Chase cobranded cards. The bonuses also vary widely, although none are as high as the Chase Cards. This could point to a difference in competitive strategy in the credit card division.
Issuing Bank: Citi
Cobrand: American Airlines and non-cobranded available
Cards: Citi ThankYou Preferred, Citi ThankYou Premier, Citi ThankYou Prestige, AAdvantage Gold Mastercard, AAdvantage Platinum Select Mastercard, AAdvantage Platinum Select World Mastercard, AAdvantage Executive World Elite Mastercard
Citi’s ThankYou rewards program operates very similarly to the Chase Ultimate Rewards model. There are transfer partners where points are transferred at a 1:1 ratio into their respective loyalty programs. Citi also offers a shopping portal as well as optional experience packages depending on the level of the card. The three Citi ThankYou cards represent the first three tranches of credit cards in terms of fees. $0, $95, and $450. The same is true with the AAdvantage cards with the Gold card occupying the lowest tier at a $50 annual fee. Citi has heavily partnered with American Airlines in terms of cobranding and transfer opportunities.
Network: American Express
Issuing Bank: American Express
Cobrand: Extensive cobranding with Delta in addition to a full line of unbranded cards
Cards: Platinum Card (Charge), Amex Everyday Credit Card, Everyday Preferred Credit Card, Premier Rewards Gold, Green Card, Gold Delta SkyMiles, Platinum Delta SkyMiles, Delta Reserve
The American Express ecosystem now includes both charge and credit cards. The Platinum card is still a charge card, and does not allow for revolving debt. The rewards system is called Membership Rewards. This takes a slightly different tact than the other major issuers rewards system as the “membership” aspect of the card makes it at least seem more exclusive. This was the original target market of American Express from its inception. They have, however, also moved downmarket. They have an additional pricing tier between $95 and $495 at $195 for the Premier Rewards Gold card. Interest rates are roughly the same as Chase at inception. Membership Rewards points also work very similarly to Chase Ultimate Rewards points. They can be transferred into other loyalty programs, and travel can be booked through their portal. The deep cobranding with Delta finishes out the remainder of the American legacy carries. The Delta cards reward through Delta SkyMiles.
For full current offer information on all of the cards mentioned go to The Points Guy.
Disclosure: I currently hold three of the cards mentioned. Great effort was made to remove any traces of personal bias present.