I received a letter from American Express promoting their Air France/KLM Flying Blue credit card. When I pay with the card I will earn frequent flyer miles. Would it make sense to apply for this card?
Airline Passenger Guru’s response:
Co-branded credit cards are a well-known phenomenon in the airline industry. Many carriers have co-branded cards enabling members of their frequent flyer programs to earn miles when they charge their expenses to those cards.
It is beyond doubt that it is profitable for airlines and credit card issuers to offer co-branded credit cards. But it remains to be seen whether such cards make sense for passengers. Flying Blue is not known as the most generous frequent flyer program, so the value of Flying Blue award miles is low, whereas the cost of the Air France/KLM Flying Blue credit card are high.
First, credit card expenses will earn you award miles, no status miles. Only the 2 most expensive cards let you earn both award and status (or level) miles. Thus, the 2 least expensive cards do not help in renewing your frequent flyer status.
The miles earned vary from 0.5 per euro at the least expensive card to 2 at the most expensive card (if spent on KLM tickets, otherwise 1.5 miles per euro). You can use award miles to pay part of ticket prices or for (rarely available) upgrades and - depending on the program - for some consumer products.
Second, American Express charges high fees for its cards, not only annual fees, but also other fees. The annual fee depends on the card you choose. There are 4 Flying Blue American Express cards:
1. The entry card with an annual fee of €35 ($37) and earning you 0.5 award mile per euro spent.
2. The silver card that costs €75 ($80) per year and will earn you 1 award mile per euro spent (on KLM tickets).
3. The gold card with an annual fee of €170 ($180) and earning you 1.5 award and status miles per euro spent (on KLM tickets).
4. The platinum card that costs €600 ($636) per year and will earn you 2 award and status miles per euro spent (on KLM tickets).
Third, in addition to the annual cost you will also have to pay 2 other fees. The first is the 2.3% foreign exchange commission over your expenses in foreign currency. The second is the foreign exchange surcharge on the exchange rate. Thus, you will pay a higher exchange rate if you pay by credit card. In addition, if you use your Flying Blue American Express card to pay for a KLM ticket, KLM will charge a surcharge of 1.75% with a maximum of €20 ($21).
An additional consideration for Europeans is that you cannot use any American Express card to refuel a rental car in the USA. The POS terminal will ask for your zip code. As it does not recognize European zip codes it will refuse your card.
The conclusion is that you will earn miles if you use your Flying Blue American Express card to pay for expenses. However, the total cost of using the card are high, so you will pay a lot for miles with a low value. From an economic point of view this does not make sense, at least not for passengers.
Related: “Are credit card surcharges legal?”