Delta and Other Airline 25K Miles Plans--Downside?

I actually do this a lot with Delta, Continental, United and American. I think that credit card companies are beginning to crack down, but in the past I would sign up for a card, collect the 30,000 bonus, keep it for the free first year, then cancel, wait 6 months then repeat. My husband would do the same as well. We've always kept our credit scores high, too. But I wouldn't do this if I were young and wanted to buy a house or a car. I think because we're in our 50s and always completely pay off each bill on time (charging everything possible each month to get miles) that it hasn't done any noticable damage to our credit scores. And being able to fly free to Europe every year (often taking the kids) makes it worth all the hassles. However, I am now waiting longer between re-sign ups than I used to before the credit card rules changed.

Unfortunately, when you reduce your available credit it hurts your score. Sounds dumb but that is way it works. For example, say your total available credit is $100,000 and you7 are using 10% of your credit - $10,000. If you cancel a credit card with a $20,000 limit you are now using $12.5 of your credit. You are now a higher credit risk because you are using more of your credit.

One downside, especially for Delta is that's it's very difficult to redeem miles when you want to schedule a flight. It takes as many as 60,000 (sometimes more) to book an award flight.

In the past few years, Delta has greatly increased the amount of miles needed to fly to Europe. My American Express Delta card used to be my primary credit card, but no longer. I now use my United and American credit cards much more since they require about half the miles. Now I just use Delta for off season flights, like my upcoming one to Amsterdam for only 60,000 miles in December. (The same flight in July would cost 107,500 miles). However, I could have booked the same flight for only 40,000 on American since they have really low off season rates. If I had to pick and choose and select just one credit card to earn miles on, it would not be Delta.

I'm missing something on the calculations. How does $20K get translated into $12.5? Do you mean 12.5K? Where did 12.5 come from?

He meant 12.5%.

Applying for a lot of credit cards can hurt your credit score. As someone has said, this is probably not a big concern if you are older, have established a credit record and aren't looking to borrow. But for a younger person, it could be an issue.

OK, but 1 over 8 is 0.125(12.5%), so where does this ratio appear?

For a younger person, it is probably best to just sign up for one airline card and use it occasionally, paying it off in full every month to establish good credit. Then when the free first year is over, rather than cancelling the card to avoid the $65-$130 yearly fee, call and switch to a fee free plan where you pay no fee and get 1 mile for every $2 spent. You will have gotten your big sign on bonus this way, can still earn miles and will not lower your credit score.

Lately for Delta, you can redeem miles as low as 10,000. At that point you would get $100 off your flight. Everytime I book a flight, I am always given the option to use miles. So maybe it is not as hard as many people think.

$10,000 outstanding balance divided by $80,000 ( total credit limit after canceling $20,000 card) = 12.5%

I think the biggest rule for airline credit cards is NEVER use them to carry a balance. If you can't pay the balance off in full every month, find a credit card with a lower interest rate to use. SOMEBODY is paying for all those "free" miles. Airline cards have high interest rates. If you have trouble with overspending, stay away from credit cards, airline award cards in particular. But if you carefully manage your money and just use the cards to earn miles without paying high fees and interest, then it's a nice way to get free travel. You just have to be careful to look at the total picture, including risk to your credit scores, before using credit cards to get miles.

I signed up for the Gold Dela Amex card a few years ago around the same time that Delta and Northwest merged. I had about 36k miles between the two at that time and used the Pay with Cash and Miles option with the Gold Amex card. For every 10k miles you have, it's 100 dollars off the airfare. No blackout dates with pay with miles. My flight to Dublin ended up being 200 bucks instead of nearly 600 flying out of Albany, NY.

Evan