Save up to 20% on your airfare by using common credit cards
Using credit cards to buy airline gift cards can often save you more money on airfare over an airline’s branded credit card.
Image: The Window Flyer
Airfare can be expensive, and for most of the travelling public, anything that can be done to reduce that cost burden is a good thing. Many travel credit cards that get pitched online have high annual fees that run into the hundreds of dollars. While the perks and benefits that these cards carry can be exciting, these types of cards are generally geared toward a smaller audience of very frequent flyers as opposed to the average consumer who might only fly a few times per year. A typical household usually does not travel frequently enough to make the cost of those cards pan out financially.
But does that mean you need to miss out on savings and free flights? Absolutely not. Here at The Window Flyer, our mantra is that air travel is for everyone. So with this post, we will share tips on how you can save as much as 20% on your airfare with everyday credit cards (that may already be in your wallet) and errand runs.
ADVERTISEMENTCash is king, and is better than Airline Miles
The running theme in this post will be cash. Just simple, plain, hard cash. As thrilling as earning miles and points from airline and travel cards may be, they often lock you into specific spending categories or airlines, and you won’t see any financial benefit until you accrue enough points redeem them.
For an average consumer who only travels occasionally, that could take several years. On the flip side, many cash-back cards allow you to cash out your rewards more frequently. And cash is king – you’re free to spend it in any way you want. You’re not just restricted to spending it on travel or with any one specific company.
Cash back eventually earns you a free flight
We should point out that cash-back works a little bit different than miles and points. You won’t get the instant gratification that comes with claiming your points for a “free flight.” Cash-back is a form of deferred savings that you get in the form of a rebate. Eventually, all the cash-back you’ve incrementally accumulated will amount to the equivalent of a free flight.
It is also worth noting that the cash rewards you can earn with several cash back cards can actually have a higher dollar value than the points and perks you would be earning from some travel cards. There are a few exceptions, such as Alaska Airlines Visa Signature Card, but we’ll cover that in a different post.
ADVERTISEMENTAirline Miles Cards vs. Travel Credit Cards vs. Cash-back Credit Cards
First, let’s take a quick look at a couple of examples of the financial rewards of a couple airline and travel credit cards.
Southwest Airlines’ Rapid Rewards Cards have annual fees ranging from $69 to $149. Some of their cards, such as their Priority tier, have benefits that can be useful but are quickly exhausted. Also, all tiers of their consumer cards only award 2 points per $1 spent. This equates to just 2.6% to 3.0% back based on a calculated point valuation of approximately 1.3 to 1.5 cents.
Chase’s Sapphire Reserve® Card carries a $550 annual fee, though it’s effectively $250 after their $300 annual travel credit. The card awards 3 points per $1 spent on travel, which equates to either 3% back if redeemed as cash, or 4.5% back if redeemed for travel, based on their listed point valuation.
While these valuations are competitive with a couple of the cash-back cards we’ll describe below, one must also consider their higher annual fees and the fact that you’re locked into spending those rewards on very specific categories and companies. It’s also worth mentioning that by redeeming travel-specific points and miles for an airline ticket, you forgo earning additional rewards on that redemption since the ticket was essentially free.
On the other hand, with cash back cards, you’re using “recycled cash” that got put back in your bank account from prior cash back credits. Since you’ll be paying the full face-value for your airline ticket with cash, you’re eligible to earn more rewards at the same time, essentially earning full rewards on what was reward money to begin with. Using free money to make more free money – what a deal!
Cash Back Credit Cards that Save on Airfare Travel Costs
With that said let’s take a look at a few common cash back cards that can be used as part of a strategy to save on air travel (and other associated costs such as lodging and dining):
Costco Anywhere Visa® Card (simple 3% back)
Amazon Prime Rewards Visa Signature Card (5% back, indirectly, which we’ll explain below)
American Express Blue Cash Preferred® Card (6% to 20%, indirectly, which we’ll explain below)
Costco Anywhere Visa® Card
3% savings
Many of you probably already have a paid Costco membership. Costco members are eligible to apply for their Costco Anywhere Visa® Card by Citi, which carries no annual fee. Technically speaking, the annual fee is your Costco membership, but you would be paying that already.
There are two strategies to save money on airfare with Costco’s Visa credit card:
The first is taking advantage of its unlimited 3% cash back on eligible travel, which includes air fare, on any airline. The 3% reward is already higher than the amount you would get back with some travel cards, such as Southwest’s Rapid Rewards cards, which only earns you 2.6% - 3.0%, and only on Southwest-specific airfare. The 3% cash back category on travel also extends to hotels and dining, two expenses you’ll likely be incurring when travelling for a family vacation, for business, or just a weekend getaway. The one downside is that cash back can only be redeemed once per year after your February statement. However, if you’re one to map out a household budget on an annual basis, the frequency of cash back should not make a difference. For a zero annual fee, this is a worthwhile downside.
The 2nd option is to purchase an airline gift card at Costco (which are typically 10% off) using this credit card. Since Costco’s branded credit card earns shoppers 2% cash back on call Costco purchases, it effectively creates a 12% discount on airfare. The one limitation is that Costco doesn’t sell gift cards to every airline, but most commonly sells them for Southwest, Alaska, and Delta.
Amazon Prime Rewards Visa Signature Card
5% savings, indirectly
If you’re a paid Amazon Prime member, you’re eligible to apply for their Amazon Prime Rewards card, which comes with no annual fee (except the Prime membership which you’re already paying). The card earns you 5% back on Amazon.com purchases.
You might be thinking, wait a minute, I can’t book a flight or hotel through Amazon.
That is true, but Amazon has several gift cards in the travel category such as Southwest Airlines, Hotels.com, Airbnb, Uber, etc. Essentially you’ll be purchasing gift cards (and earning 5% cash back at the same time) to cover the cost of your travel.
It’s an indirect way of saving money, but it’s still cash back in your pocket. Amazon also has a wide range of dining gift cards, so you can also earn 5% cash back on that family vacation dinner.
The downside, is that not every travel or dining entity has a gift card available on Amazon, so your selection may be limited. But one of the main advantages of the Amazon Prime Rewards card is that you can redeem your entire cash back balance every month, no matter how big or small. You can also redeem it directly at Amazon as a discount off your next purchase, but similar to above, we recommend redeeming it as a statement credit or bank account credit so that you can use that cash money to earn more rewards.
ADVERTISEMENTAmerican Express Blue Cash Preferred® Card
6% to 20% savings, indirectly
The Blue Cash Preferred® card, from American Express, can be a great deal when used correctly. It comes with an annual fee of $95, but rewards you with high percentages of cash back.
Cash back can be redeemed with every $25 accrual. It’s great for road trips, earning 3% cash back at U.S. gas stations, and 3% back on things like rideshare, parking, tolls, transit, etc. But where it excels is its 6% cash back at U.S. supermarkets on the first $6,000 per year. If you’re a family who purchases a lot of groceries, this card, even with its annual fee, can make a lot of sense. Now for the travel savings part.
But similar to the Amazon example above, you can use this card and its 6% cash back at U.S. supermarkets to purchase travel-related gift cards at grocery stores. Many grocers have large gift card racks located near the front of their stores that include cards for a small selection of airlines and lodging.
After the 6% cash back, how can you boost your effective travel discount to 12% or higher? You are mostly likely already aware that many national grocery chains, such as Kroger and Albertsons, along with their subsidiaries like King Soopers, Fry’s, Fred Meyer, Ralphs, QFC, Safeway, etc. have rewards program that earn you fuel discounts. Both Kroger and Albertsons’ rewards programs currently award you 2 points per $1 spend on gift card purchases, which can be redeemed for a discount of $0.10 per gallon of fuel for every 100 points. How much is that worth?
Let’s say we purchase a $200 Southwest or Delta Air Lines gift card at one of these grocery stores. Based on the 2 points per $1 award rate, this purchase would earn us 400 fuel rewards points, which yields a $0.40 per gallon discount on gas. For an average car that holds 15 gallons, that works out to a total gas discount of $6, which is effectively a 3% discount on the gift card (6 / 200 = 0.03). Combined with the 6% cash back from using the Blue Cash Preferred® Card, you essentially have a travel discount of 9% off. Can this go even higher? You bet.
Occasionally, Kroger runs promotions where they award 4 fuel points per $1 spent on gift card purchases, which would double your gas discount, bringing the effective gift card discount to 6% on a 15 gallon purchase. Combined with the 6% credit card cash back, you’ll be getting the equivalent of a 12% discount on your airfare.
Kroger also lets you apply the reward on up to 35 gallons of gas in a single transaction, so if you own a truck or large SUV that has a large gas tank, you could push this % discount even higher. Your discount on a travel gift card could theoretically go as 20%:
6% from AMEX cash back
14% from the gas discount (4x points promo for a $200 gift card earns 800 points. That is good for a $0.80 discount on gas. For a 35 gallon fuel purchase, that yields a $28 gas discount, or 14% of the value of the gift card you earned those points from).
Lastly, while this method was about using the American Express Blue Cash Preferred® Card in conjunction with grocery store rewards, if credit cards are not your type of thing, this strategy still works with a debit card or plain cash, still yielding savings as much as 14%, depending on the size of your gas tank.
Summary
In closing, just because you are not a frequent traveler doesn’t mean you have to miss out on travel savings with credit cards. You don’t even need to possess an airline or travel-focused card. There are many everyday cash back credit cards with no or low annual fees, as outlined above, that can get you an effective discount on air travel that are as good, and sometimes even better than, the effective discounts from airline or travel-specific cards.
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