Best travel reward cards
Airline frequent flyer credit cards are a bad deal. Get these cards instead.
By Barney Gimbel, FORTUNE senior writer

NEW YORK (FORTUNE) - Open up your wallet and look through your credit cards. Now take out a pair of scissors and cut up the ones with the name of an airline on it.

Yes, that's right. Forget all you think you know about getting free travel rewards and listen up: Airline frequent flyer credit cards are a bad deal. And that's not only because of high interest rates and annual fees.

It's because they give you little bang for your buck and limit your options. Airlines are flying fewer planes with cheaper fares, while a record number of people are accumulating countless frequent flyer miles. That translates to fewer available reward tickets that are worth less and less. Plus by earning miles on one airline, you're severely limiting your options for your next vacation.

But while hotel rates are setting record highs, they're also relatively easy to find free. At Starwood (Research), the parent company for such brands as Westin, W, Sheraton, St. Regis and Le Meridian, you can use Starwood Preferred Guest points for any available room. (It's also pretty easy with the other big chains like Marriott, Hyatt or Hilton, but many have minor restrictions.)

"For some reason, people seem to forget they spend more on an average hotel stay than they do on their airline fare to get there," says Randy Peterson, editor of Inside Flyer Magazine. "It just makes more sense to be invested in a hotel rewards program."

That's because not only will accumulated Starpoints work for any of the more than 800 Starwood hotels, they can also be transferred to 30 different airlines. And best of all, for every 20,000 points transferred to an airline's frequent flyer account, you get a 5,000-mile bonus. "It's as close to the Swiss Army Knife of rewards cards as it gets," says Tim Winship who publishes "It all comes down to simple math."

For example: Four nights at the Westin Maui Resort and Spa costs $415 per night for a standard room in May. Four nights would cost you $1,660 before tax. Using your Starpoints, it would cost 12,000 points a night, or 48,000 points total. That means you're getting 3.5 cents per point -- a premium considering if you were to use airline points to get there from New York, for example, they would be worth close to 1 cent per mile -- that is if seats were available at all.

With that in mind, FORTUNE surveyed the best travel reward credit cards.

Starwood Preferred Guest American Express

Issuer: American Express

Annual fee: Free the first year, $30 thereafter

Airline partners: More than 30

$1 = 1 point

The gold standard for rewards credit cards, the Starwood card gives you the most flexibility for business and leisure travel. Not only can you get a room in a Starwood hotel for as few as 2,000 points (no blackout dates), but you can also transfer those points to any of more than 30 airlines. And best of all, for every 20,000 points transferred, you get a 5,000-point bonus.

Marriott Rewards Premier Visa Signature Card

Issuer: Visa

Annual fee: $65

Airline partners: more than 25.

$1 = 1 point (5 points per $1 spent at Marriott locations; 2 points per $1 on airline, dining and rental car purchases.)

If you're looking for free hotel rooms, this card is worth a close look. While it has no bonuses for transferring points into miles, Marriott (Research) and its partners have the most locations (more than 2,600) and include the luxurious Ritz Carlton chain.

American Express Membership Rewards

Annual fee: $110

Airline partners: More than 10 (Doesn't include American, United or Northwest)

$1 = 1 point (double points on purchases at supermarkets, gas stations, drugstores, the U.S. Postal Service and on wireless phone service)

One of the most popular rewards programs, American Express prides itself on having the largest catalog of items that members can redeem their points for -- from CDs to golf clubs to airline tickets. However, the domestic airline choice is limited and some of the conversion rates for other products can be pricey.


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