Whether you're booking a flight home for Christmas, traveling frequently for business, or planning a honeymoon, travel-specific credit card rewards programs may pique your interest.
Whether for business or pleasure, the points you earn for each dollar charged on your travel credit card can be applied to earn rewards, like airfare, accommodations, or even Amtrak tickets. Travel-related companies have combined forces to make travel points easier to earn and more valuable. These programs often combine airlines, hotel chains, and car rental agencies to multiply the point-value of dollars you spend on travel.
If you haven't already taken advantage of travel credit cards, now might be a good time to start spending your way to these rewards. Or, you may simply want to fine tune your strategy and confirm you're taking advantage of your rewards programs.
10 Key Features to Shop for in a Travel Credit Card
Choosing a credit card with the best travel rewards program involves a comparison of the nuts and bolts of competing programs. Make sure you evaluate these 10 key components:
Each program defines the number of points you'll need to earn to redeem a travel reward. To get you to sign up as a first-time customer, many card companies offer a sign-up bonus in the form of free points. Choose a card that offers many free points. Starting off with 40,000 points in your rewards pocket just for signing up accelerates the time horizon to a free flight, which is especially helpful for planning your much-needed tropical vacation.
You'll find many airline- and hotel-specific cards offer bonuses between 40,000 and 100,000 points. For example, a card issuer may offer 40,000 points when you charge $4,000 on the card within the first three months after opening your account.
Program rewards rate are not all the same. You'll discover that most credit cards offer one point for every dollar spent, a one-to-one ratio. However, the good credit cards will give you extra points when you shop at specific retailers or within certain spending categories. For example, one card may give you two points for every dollar spent on travel and restaurants — a two-to-one rewards rate. So, if you're already a regular at an in-town seafood restaurant that qualifies for a card's two-to-one rewards rate, by signing up for the credit card and its rewards program, you'll create a win-win situation for you and your palate.
It is not unheard of to earn 20 points for every dollar spent through an online shopping portal, so it can't hurt to look for ways to increase your points per dollar spending opportunities.
Credit card issuers usually require a minimum spending amount before you'll be eligible to receive a bonus. Sometimes the spending requirement is reasonable — perhaps $2,500 within the first three months. Other times, the spending requirement is much larger or must be met within a shorter time period, resulting in spending that vaults you out of your monthly budget.
Using a travel credit card just for the bonus offer may not be worth your while because of the havoc it can wreak on your wallet. Sticking to your budget may likely fall much higher on your priority list than snagging travel-related bonuses.
Fees for company-branded credit cards typically range from $50-$95 per year, although you can find annual fees that fall outside this range. Some cards do not charge annual fees, while others charge as much as $450. The general rule is that you'll earn more points through cards with annual fees. Fee-based cards usually make sense only if you think you'll earn a lot of points, which will more than cover the cost of the annual fee.
A travel card requiring a fee might not be right for you. If you don't anticipate frequent travel, choose a card with a low or no annual fee. Some companies periodically offer promotions that waive the annual fee for the first year, so you may be able to take advantage of this offer if your timing is right.
The ongoing interest rate refers to the interest rate, or APR, for your credit card after its introductory or promotional period ends, when credit card companies typically offer lower rates. Ongoing rates for rewards cards may be high, so carrying a balance on your credit card is not recommended. Yet the reality is that credit card debt is an unpleasant fact for many Americans. The average outstanding credit card balance for families carrying a balance is $15,609.
Even if you don't plan to carry a balance, look into the ongoing rate for your travel rewards card. Can you find one with a lower interest rate than others? If you can't find one, call several different credit card companies and suggest that they are competing for your business: basically, if you don't stumble across a reasonable ongoing rate, try to secure one.
Many credit card companies charge fees for using the card outside the country. The currency conversion fee typically ranges from 3-7 percent and constitutes a charge for converting U.S. dollars to the currency used in a sales transaction. Conversely, a foreign transaction fee typically ranges from 2-3 percent of a sale and is a charge for converting a payment in foreign currency into U.S. dollars.
Look for lower transaction fees, which vary greatly. You can find credit cards that neither charge currency conversion fees nor foreign transaction fees. Depending on the payment network — American Express, for instance — a card company may be prohibited from charging a foreign transaction fee.
Seek out detailed information about credit card rewards rates for travel purchases. Certain credit card purchases do not qualify for rewards program points, so you should confirm whether restrictions exist for travel-related purchases. For instance, some credit cards do not allow you to earn points for airfare purchases that are part of a package. For hotel stays, sometimes you cannot earn points if you prepay with a third party, including online travel agents and tour operators. With car rentals, credit card companies may limit the rental companies to select companies, such as Hertz or Avis.
Know the restrictions of a card before you apply. Look for cards that allow you to double- and triple-dip by using travel credit card and then enter your airline miles card to earn points from both on one flight.
You can make travel credit cards work for you, but navigating their complex, sometimes nuanced rules and restrictions can give rise to headaches. Some credit card companies are more lenient and flexible than others.
Look for a card that allows you to charge a flight and hotel stay on the credit card and use the points you've earned to pay for the travel charges — an example of redeeming points for a statement credit.
Your credit card's payment network may also matter. As a general rule, Visa and MasterCard are accepted virtually any place credit cards are accepted, while American Express and Discover are accepted to a lesser degree. Choose a card that has a wide network, and more importantly, is accepted at merchants where you will be spending money. This is especially important if you only have one or two credit cards.
Consider owning cards from competing networks to cover your bases, especially when you travel overseas. If you regularly travel out of the country, choose the payment network friendlier toward foreign charges and supports toll-free worldwide emergency services.
If you've narrowed down your credit card choices, the extras may tip the balance in favor of one card. Some credit cards offer extras in the form of redemption bonuses and complimentary FICO credit score reports. For hardcore business travelers, perhaps individuals that travel weekly by plane, extras in the form of hotel-room upgrades, waived airline baggage fees, complimentary Wi-Fi or in-flight gifts, such as beverages and food, may clearly put one credit card above the rest.
Understanding your own spending habits, preferences and behaviors makes the relevance of extras a crucial selling point.
Top 7 Gotchas of Travel Cards
All credit card travel programs promise great rewards and perks. But all cards have their restrictions and conditions on the timing and conditions under which you can redeem your points. Watch out for these seven common restrictions:
Blackout dates are calendar dates, defined by your credit card company, during which you can't redeem points for airline travel, hotel stays or other rewards. Blackout dates can be a true inconvenience if most of your travel occurs during holiday periods, such as those weeks coinciding with school vacations or other peak travel periods of the year. That's because many rewards programs' blackout dates often mirror these peak periods. If you expect to do most of your travel during these times, it may be worth the effort to find a credit card that has fewer or no blackout dates.
Many rewards programs require you to spend a minimum amount before you can earn bonus points. In some cases, the threshold amount is over your budget and may entice you to spend more than you can afford, often on items you really don't need, like a flat-screen television to put in your bedroom. Perhaps you're coming off a particularly generous, gift-laden holiday season and you're still playing catch up on your bills. Taking on a promotional offer of a travel credit card promising 50,000 miles provided you spend $3,000 in the first 60 days of the account opening may not be wise.
Those points you've earned through the program may expire before you have a chance to redeem them. Maybe you weren't paying attention, or you simply didn't earn enough points to redeem them for a reward. In either case, you'll need to keep track of your points and know when they expire. Naturally, the more time the program allows for you to redeem the points, the better. A typical period before point expiration is five years. For some travel reward programs, your points will not expire as long as your account remains open.
To get you through the door, credit cards often waive the annual fee for the first year. After that, annual fees kick in, which can run as high as several hundreds of dollars. If you end up charging less on your credit card, or you fail to redeem points before they expire, you may end up shelling out more to have the card than benefitting from the rewards. Perhaps at the time you worked at a company that required frequent travel, which justified getting the card. You may have since left for another employer and you don't travel quite so much. The card is simply not worth the annual fee.
Payment behavior may affect your ability to use the points you've already earned. Late payments are often the kiss of death. Some programs prohibit you from earning points in a billing cycle during which you were late in submitting a payment. Some companies may even eliminate all rewards you have earned if you are late on payment for two consecutive months. At best, the company may freeze your rewards until you are current. Lack of card use can also affect your points. An inactive account for a period — such as 18 months — may result in a loss of all points.
Some credit cards make it difficult to earn points. They are finicky about your purchases and limit the types of purchases that qualify for points. Perhaps you must buy from certain merchants to earn points. In some cases, after you've redeemed points for an airline ticket you cannot change the ticket under any circumstances. If you end up having to postpone a vacation as a result of an employment change or illness, you can't change the ticket and end up losing the reward altogether. You're left with little or no recourse.
Various service fees and redemption fees card companies charge you for redeeming your points may put a sour taste in your mouth. Suppose you've finally earned enough points to redeem an airline ticket. When you redeem your ticket, you're hit with a $600 fuel tax surcharge, which may cost more than simply purchasing a ticket outright to your destination. Your rewards program has passed the surcharge on to you. Gas prices have fluctuated dramatically in recent years and unless you're a commodities expert — and even if you are — you never know what fuel tax you'll incur with airline miles.
5 Steps to Choosing the Best Travel Credit Card and Using It Wisely
To choose the best travel credit card, you need to know yourself. That's because, as a whole, travel credit cards are the most complicated of consumer credit cards. Programs and their rules vary widely: There are so many different ways to earn points and as many restrictions on redeeming points earned through them. There is no one best travel credit card that works best for all consumers, so knowing yourself helps you narrow down the choices.
To get the most out of a travel card, take these five steps:
A review of your spending habits should constitute more than a back-of-the-envelope calculation. Pull out credit card statements covering the previous six months, perhaps dividing your spending into categories for better comparison. Certain cards offer extra points for gas, office supplies, restaurants, travel, or other categories. Determine whether your current and expected credit card use align with the points programs for travel credit card offers you're considering. Estimate the points you would earn with each card. If they don't align, you may need to go back to the drawing board and identify more suitable card rewards programs.
Define your goals. Do you want to earn free miles, hotel stays or both? Do you have particular destinations in mind and, if so, are they foreign or domestic? How long would your travel last? Would you be happy with a three-star accommodation, or is a four-star luxury hotel a must? Make an educated guess about the number of points you will need to redeem to earn free tickets and hotel rooms. This is a critical calculation because the points required for airline tickets or hotel stays can differ significantly between rewards programs.
Now that you have a clearer picture of where you stand you have the information to choose a suitable card. Consider these options:
Go with this if you foresee flying a particular airline often, perhaps because it uses your local airport as its hub or it has many flights to various destinations you frequently visit. Don't forget to identify your preferred airline's partners so that you can understand your redemption options.
Card With Redemption Flexibility.
If, on the other hand, you expect diverse travel destinations, then choose a credit card that allows you to easily transfer points for use with many airlines and hotels. The flexibility allows you to fully use your points before they reach their expiration dates.
Cash-Back Card or Gas Card.
Maybe your travel doesn't usually involve getting on a plane and staying a hotels. Instead, you often take on day trips within driving distance. In this case, consider going with other rewards options, including cash-back and gas cards, which provide rebates on your gas purchases.
By looking at your past payment behavior, you should have a general idea whether you'll end up carrying a monthly balance. Points become expensive to earn if you carry a monthly balance, so looking for a low-interest card would be of great help.
Having several travel credit cards with differing rewards programs helps you best utilize your points. For example, if a card offers extended warranties on home electronics, use that card for cell phone or computer purchases. If another card offers car rental insurance, use that card to avoid the expensive coverage offered by rental agencies.
Multiple Payment Network Cards.
Although card issuers largely determine the features of rewards programs, network diversity can still matter when it comes to perks. American Express and Visa tend to offer different perks, such as discounts at different online vendors, purchase protection, luggage insurance, credit scores, and other convenient services.
Now that you've decided on the best credit card for you and have received card approval, start spending. Use it to earn it. Make sure you use your card for qualifying expenses, including everyday expenses, to earn as many rewards as possible. Your grocery bill can add up, for instance. Assuming your credit limit allows for it, favor your travel credit card whenever your purchase will earn you points. You can more quickly earn points if you put large necessary charges on the card. Think big: Some consumers pay their income taxes and tuition bills using their travel credit cards.
Getting the most bang out of your points means exercising careful use in redeeming them. Consider these tactics:
Shun Catalog Purchases.
Avoid redeeming points through a merchandise catalog, which often sport steep price tags for what you get. A set of binoculars in a merchandise catalog may be worth $200 in points, but you could easily purchase the same product at half the price on Amazon.
Choose Cash Over Gift Cards.
Cash is almost always the better redemption choice. Choose cash unless you already have plans to make a purchase at the gift card's corresponding store. Another exception that would make a gift card appropriate is if you're planning to give the gift card to a friend or family member as a holiday gift or birthday present.
Pool Points With Someone Else.
Some programs allow family members to combine points to reach the rewards amount. This tactic is particularly helpful if you're worried that changes in rewards programs may increase the points needed to redeem rewards. Redeeming your points as soon as possible is a smart move and combining points allows you to do just that.
Move Points to One Account.
If you have points spread among several cards with the same card issuer, such as Chase, you may want to move all your points into one account to qualify for a larger reward, such an international airline ticket. Generally, spreading yourself too thin between rewards programs lessens your points-earning power and hence your points-redeeming opportunities.
Double-Dip, Triple-Dip, Even Quadruple-Dip.
Use one card transaction to earn points in more than one program. For example, with Citi Prestige Card, you can double-dip. Earn points in two programs: first by using your travel credit card to pay for a restaurant meal and then again by registering your credit card with OpenTable, which gives you 100-1000 points for every restaurant reservation you make through the website.
Use Your Points.
This one may seem obvious, but it's worth repeating. Redeem your points and use them. Many consumers simply forget they have enough points to redeem for rewards. One study shows that a mere 25 percent of cardholders redeem points in a one-year span.
Travel Credit Cards v. Loyalty Programs
Apart from travel credit card issuers, airlines and hotels are just as eager for your business. They compete for your business with loyalty programs that similarly earn you points and other perks whenever you travel or stay with them. If you're a frequent traveler, enrollment in loyalty programs of your preferred hotel chain or airline can quickly earn you a free ticket or hotel stay. Loyalty programs also offer more than free tickets or accommodations. For instance, you can earn music downloads, movie passes, spa treatments and charity donations.
Many airline and hotel loyalty programs exist. Here are just a few:
Choice Privileges (includes Comfort Inn and Clarion Hotel)
Hilton HHonors (includes DoubleTree, Hampton Inn, Embassy Suites)
Starwood Preferred Guest (Starpoints) (Includes Sheraton, Westin and St. Regis Hotels)
You'll find that many airlines participate in travel alliances. These alliances give you flexibility by letting you transfer points between alliances partners. With this convenience, you can easily combine enough points to redeem them for a reward.
Loyalty programs in conjunction with travel credit cards offer many double-dipping opportunities. Double your points from one transaction by paying for an airplane ticket with a travel credit card and entering your loyalty member number for the same transaction.
Consider American Express' Plenti credit card, for example. Its Plenti program is specifically designed for double-dipping transactions. After signing up, customers can shop at any Plenti partner retailer using their American Express Plenti card. Aside from points earned from participating in airline and hotel loyalty programs, consumers earn points when they use their Plenti card for transactions at participating stores and service providers. The program can be a great fit for someone who already shops at participating stores, such as Macy's.
Even better than double-dipping is triple-dipping. Many hotel and airlines link their loyalty programs. When you purchase a plane ticket on the airline's website and book accommodations with a linked hotel in the same transaction, you earn triple points — from the travel credit card, the airline loyalty program and the hotel loyalty program.