(MONEY Magazine) – Eight years ago, Diners Club came up with a bright idea called the Club Rewards Program: card users would be awarded points for every dollar they charged and then be allowed to redeem those points for free prizes such as air travel, ski-lift tickets or even designer sunglasses. The rest, as they say, is frequent-flier history. By 1987, American Airlines had teamed up with Citibank. Others quickly followed, and today every major airline but Delta has a frequent-flier program for a bank-issued Visa or MasterCard. Basically, these credit cards with airline logos -- called affinity cards -- work like other bank plastic except you get rewarded for using them. Each program grants consumers one free flight mile for every dollar charged. Some offer other benefits too, like insurance for luggage, for travel accidents or for car rentals (see the table at right). All the cards offer cash advances (at stiff 16.5% to 19.8% rates), and all provide 24-hour emergency phone service. The perks come at a cost, however. Annual fees range from $25 for Alaska Airlines' MasterCard or Visa to $100 for United's MasterCard Gold or Visa Gold. Last June, American Express entered the fray with its Membership Miles plan that allows cardholders to link total charges on AmEx's green, gold, platinum, corporate and Optima cards. Like Club Rewards, Membership Miles allows card users to redeem points in the frequent-flier programs of Continental, Delta, % Grand Air, MGM, Northwest or Southwest. Diners Club choices include American, America West, Continental, Delta, Northwest, Southwest, TWA, United and USAir. Enrollment in Club Rewards is automatic, but you must call to join Membership Miles. And in April 1991, Minneapolis-based Carlson Travel Network introduced Visa Gold and Visa Silver issued by First Bank of South Dakota (800-388-8472). Holders of these cards can earn discounts and upgrades from companies such as Continental Airlines and Carnival Cruises. Air Miles, a program adopted here last month by the Boston-based Loyalty Management Group (800-547-2212), has no enrollment fee and offers free air- fare credits for buying certain snack foods, magazines and other products. The program has been successful in the United Kingdom. So far, Air Canada, American, United and USAir have agreed to participate. Clearly, affinity cards can make sense. Some pointers: -- To calculate whether you'd profit from an affinity card, balance the annual fee against how long it takes to earn a round-trip ticket. For instance, if you charge $5,000 a year on an American Airlines Visa (annual fee: $50), it would take four years (or $200) to earn the 20,000 miles needed for one domestic round-trip ticket. Says Randy Petersen, publisher of Inside Flyer, a Colorado Springs newsletter: ''If I earn a free $200-or-more ticket over two years, then paying even a $75 annual fee is money well spent.'' -- If you fly infrequently, Diners Club Rewards or American Express Membership Miles programs may be the best choice. Each allows you to stockpile points and decide on your reward (and airline) later. One catch: American Express won't redeem any points until you spend at least $5,000 a year. -- Apply for additional cards for family members to earn more miles. Usually, there will be no extra annual fee. -- Match your wanderlust with the right airline. If what you want is a trip to Rio, for example, don't sign up with Alaska Airlines. -- As long as you can pay off your balance each month, use the cards to charge everything -- from grocery and utility bills to college tuition and even state tax bills in Maryland and Montana. You'll get a 30-day float and rack up points. -- If you typically roll over a hefty balance, though, avoid these cards. Most charge high interest rates. ''When there are cards with rates as low as 8.5%, paying as high as 19% on your balance doesn't make sense,'' says Mary Beth Butler at Bankcard Holders of America.

-- Don't use your card for cash advances. Those transactions don't apply toward mileage, and fees are high. -- Business travelers who charge big-ticket items for which they are quickly reimbursed benefit most from these cards. Company policies about frequent- flier mileage vary, however, so check your employer's policies before you sign up.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: COMPARING THE PROGRAMS Annual fees for affinity cards can go as high as $100, but the majority cost $25 to $50. Some tips: -- Now operating in Chapter 11, America West, Continental and TWA are riskier than other frequent-flier programs. When it comes time to redeem your mileage, they may no longer be in business. -- American often runs promotions of 5,000 bonus miles for first-time card users. Wait for one. -- To join Canadian Airlines' program, you must have a home address in Canada. -- For programs that allow you to skip a payment, remember this: you will still owe that month's interest.