Travel Rewards Credit Cards 101
What is a travel rewards credit card?
If you don't know what a travel rewards credit card is, you can probably make a pretty good educated guess. Just as you probably would think, a travel rewards credit card offers rewards that can be redeemed for travel. But things can get a little confusing since every travel credit cards sometimes have little quirks.
For instance, while a travel rewards credit card offers rewards that can be redeemed for travel, many travel rewards credit cards offer points that can be redeemed on non-travel merchandise and services. And while travel rewards credit cards are definitely not the same thing as a cash-back credit cards, some do offer options for cash back. Furthermore, some offer "fixed value" rewards in which you redeem your points or miles according to a reward chart, while others offer points or miles that can be transferred to various partner programs and redeemed at varying values depending on the program. And, well, some give you the option to do either.
So like planning a trip, you want to do your research before applying for a travel rewards credit card. Otherwise you could find yourself appropriately enough – lost.
But don't worry. If you're trying to navigate the murky world of travel rewards credit cards, consider this article your tour guide.
Types of travel rewards credit cards
Understanding the differences between the types of travel reward credit cards is half, or even most, of the battle. Once you know what you're interested in, you'll have much better luck deciding what type of card to apply for.
The main types of travel rewards credit cards are those that offer cash-value points and those that offer points that have, well, a points value.
Travel rewards cards with a cash-value system
These cards are likely the ones that offer you the greatest range of flexibility when it comes to your travel rewards. In general, they aren't tied to a particular hotel or airline brand so you don't have to worry about things like maximizing your rewards by only staying with a specific hotel group or only flying on one airline. Cards such as the Capital One® Venture® Rewards Credit Card and Discover it® Miles are a few prime examples of cash-value travel rewards cards. Your points or miles or rewards (different issuers call their rewards different things) are worth a fixed value, typically $.01 each.
With these cards you typically pay for your travel purchase on your card and then redeem your rewards as statement credit to cover that purchase. So, for instance, let's say you need to book a flight and it costs $500 round-trip. You'll pay for your purchase on your Capital One® Venture® Rewards Credit Card and, if you have 50,000 miles in your rewards account, you'll then redeem those 50,000 miles as statement credit to cover the cost of that ticket. Fly any airline, stay at any hotel, anytime--no blackout dates. Plus transfer your miles to over 12 leading travel loyalty programs.
Some perks of getting these cards: For starters, you'll have fewer restrictions like blackout dates. There also shouldn't be any expiration dates for your rewards as long as your account remains open, and many of these types of cards even offer bonus rewards for things other than travel, such as dining out and gas station purchases. Perhaps the best perk, however, is that these cards essentially allow you to "double dip" when it comes to earning rewards.
If you're a member of a hotel or airline loyalty program, you likely already know that you don't earn miles or points in those programs for reward flights or stays - if you redeem your rewards for a free night or free flight, you won't earn any rewards for that. In some cases with these fixed-value travel rewards credit cards, however, you can earn loyalty rewards with your respective hotel or airline loyalty program even on your reward purchases. That's because, as far as the airline or hotel can tell, you're paying for your flight or stay out-of-pocket and qualify to earn rewards on that purchase; only you know that you're claiming credit card rewards to cover the cost. (Notice that we said some cases; check with your individual card's rewards program for details).
Some drawbacks of getting these cards: Generally, these cards don't offer any special treatment for loyalty the way others do that have a particular airline or hotel brand associated with them, and if you close the account, the rewards are likely gone; whereas, a card that allows you to bank points with a hotel or airline loyalty program allows you to keep your points even if you decide to close the credit card account.
Travel rewards cards with a point-value system
If you have a points/rewards-value travel rewards credit card, it basically means that your rewards don't have a direct relationship to the actual cost of whatever you want to redeem them for. This situation is most apparent for things like airline reward flights. Usually, the number of points you need to redeem for a particular flight doesn't change as the actual monetary cost of the flight fluctuates (which you probably know can happen often and vary widely). A flight that requires 15,000 miles will likely require 15,000 miles whether the actual cost of that flight is $250 or $500.
A few credit cards, such as the Chase Sapphire Preferred® Card and other cards that operate on the Chase Ultimate Rewards® point system, can be both cash-value (if you redeem your points through the Ultimate Rewards® travel portal) or points-value (if you choose to transfer your Ultimate Rewards® points to one of a number of airline or hotel loyalty programs).
The most common types of points/rewards-value credit cards are airline and hotel-branded cards.
Some perks: You can expect free bags and upgrades on the airline associated with your credit card. You also might receive free (!) or severely discounted companion tickets as well as other discounts for you and your companion for your loyalty. And often, as noted earlier, your airline keeps the rewards housed in its loyalty program, so you keep your miles and points even if, for whatever reason, you close the credit card.
Some drawbacks: If you aren't loyal, these don't reap maximum rewards. That's common sense, but that explains why you don't rush into this. If you think, "Yeah, I flew this airline once," and you get the card, and then you end up hating the airline - or are the type of person who goes for the cheapest flight available and have no loyalty to an airline - well, this type of card isn't going to do all that much for you.
Another drawback: Bonus categories - meaning you receive extra points for a certain type of purchase - are generally only offered on purchases with that airline. That, again, isn't a major downer if the airline is your favorite and you're often flying with them, but if you're only looking for one or two flights a year, this might not be your best travel rewards card option.
Some perks: Free upgrades, free nights and discounts for loyalty are generally the hallmarks of these cards. Often (but not always), you'll find that, as with the airlines, the rewards are housed in loyalty program so you keep your points even if you close the credit card.
Some drawbacks: If you aren't loyal, these don't reap maximum rewards; generally, bonus categories are only on purchases with that hotel brand. Again, not a drawback if you have a favorite hotel that feels like your second home. But definitely a negative if you tend to mix it up with your hotels.
Who should get a travel rewards card?
Sit down. You won't believe this. These types of cards are best for… travelers.
Yeah. Who knew?
But, actually, it's not silly to point that out. Travel is fun and exciting, and almost everyone travels at one point or another, so it's easy to get caught up in the idea that you need one of these cards. But if you just travel occasionally, going here and there but sometimes a couple years pass without you going very far, then a different type of rewards credit card, one that doesn't focus on travel, is probably a much better idea.
You should, however, considering applying for a travel rewards credit card if you are one of these types of travelers:
- You're a globe-trotter. If you're the sort of person who travels all the time for business or pleasure, then, of course, you can make a very solid argument for applying for a travel rewards credit card. As for what type of card - a general travel rewards credit card, an airline credit card, a hotel branded one - the smart choice is whatever you prefer and seems to make sense. If you only fly one type of airline, then take a good look at applying for a credit card from your favorite airline. If you're up for anything and don't care where you're staying, maybe a general, all-purpose travel rewards credit card is best. But the main thing is - if you're traveling all the time and spending money, you might as well get some of it back with things like airline miles and no fees for your luggage.
- One big trip a year-ers. Yeah, that's a real phrase. (Er, don't look it up. Just take our word for it.) So you tend to go on a big vacation once a year? And you spend a small fortune every time? Then, sure, get some of that money back with your travel rewards credit card. You're a good candidate for one of these cards, though you should probably stick to the cash-value rewards category discussed above.
- Someone who lives far from your family. Assuming you wish you could see your parents or siblings or other relatives, a travel rewards credit card could be your ticket for seeing them more often. Or at least when you do visit your family, you'll rack up points and miles that can go toward other trips (or more trips to see the family). So if this is your situation, once again, a travel rewards credit card is probably something you should apply for.
How to choose a travel rewards credit card
OK, so if you've figured out that you definitely are interested in travel rewards credit cards, you still have to make a decision. Even if you think you'd like an airline-branded card or a more general purpose one, there are plenty of little factors you'll want to mull over. Such as …
Analyze your spending habits and lifestyle. Let's say that a travel rewards credit card you're eyeing not only offers a lot of points when you buy airline tickets, it also gives you two points per $1 every time you fuel up your car (you might consider the Capital One® Venture® Rewards Credit Card that offers two miles $1 spent spent on everything). Or let's say that you don't have a car and you take the subway or a bus to work. Well, you can see where we're going with this. Maybe you want to find a card that offers two or three points on dining at restaurants and travel that includes commuter transportation, if that is something you do frequently (you might want to look at the Chase Sapphire Preferred® Card or Chase Sapphire Reserve®, for instance).
Do you travel enough to justify a travel rewards credit card? We've covered that pretty thoroughly, but, hey, just something to ask yourself again. Maybe you need a general purpose rewards credit card.
What's your credit score and credit history like? In other words, is it good? Just so you don't get too prematurely excited, you're not likely to be offered a travel rewards credit card by a credit card issuer if your credit score or credit history is hobbled by a pattern of late fees, bankruptcies and so on - unless, of course, that's way in the past, and you've since turned things around in a big way. As with any credit card, you should know your credit score before applying and ensure that your score fits within the range of what the issuer generally requires (of course, there are no guarantees you'll be approved regardless of your score). CardRatings lists a general credit score range with each of the cards on our site, so you can get an idea of what an issuer is looking for.
Carefully consider the welcome offers and bonuses. Welcome bonuses can be awesome, but only if you use them - and want to use them. For instance, if a credit card is offering 50,000 bonus points worth $500 within the first three months of opening your account, that may sound great, but less great if you have to spend $5,000 before getting them and you know you can't afford that kind of spending in three months time.
But if you know you could easily spend $5,000 in three months on everything from utilities to groceries, then maybe it's a no-brainer to spend that money to get $500-worth of points. On the other hand, if you don't think you can spend $5,000, and especially if traveling isn't in the cards in the near future (in which case, why, again, are you looking at travel rewards credit cards?), then you may be getting a card with a welcome offer that really isn't going to do much for your bottom-line.
You also want to make sure that the bonus will be dolled out soon after you meet the spending threshold, or will it be delayed for a few months? That might be crucial information to have if you want to use the bonus points for a trip at a certain time. In most cases, bonus rewards credit to your rewards account within a few weeks, but in the case of, say, Discover it® Miles, Discover will match all the rewards you earn during your first year as a card member, but you won't see that match until the end of your first year.
What are the fees? This is very important to look at - especially annual fees and foreign transaction fees. Some annual fees can be pretty steep, although often in the first year they're waived. But, still, next year, do you want to pay the annual fee? Maybe it's not a big deal if it's less than $100; maybe it's a bigger deal if it's $500.
Often, the more sizable the annual fee, the more perks you'll have with the card, but you want to make sure you're going to use the card enough and get enough perks, points and amenities to justify spending money on an annual fee. If you spend $495 on an annual fee, and you only land about $300 in discounts in a year, that's not math you can get excited about. On the other hand, if you spend $495 on an annual fee and the perks and discounts add up to $750 in a year, well, you're coming out well ahead.
As for foreign transaction fees, those are fees that your credit card issuer will sometimes add onto purchases you're making abroad. Not all travel rewards credit cards have them - in fact, more and more of them don't - but some do. Usually the fees are between 3 and 5 percent. So if you travel abroad and use your travel rewards credit card for all of your purchases in another country, you may add 2 or 3 percent to the cost of your entire trip, which, of course, can eat into the discounts you're accruing when you use your card to begin with.
That might lead you to think, "Well, fine. I won't use my travel rewards credit card when I travel abroad." But then you're missing out on discounts, earning rewards and the security of using a card as opposed to cash, all of which are kinda the whole idea behind travel credit cards.
There are reasons you really should use your travel rewards credit card when you travel internationally. For one, you may get a better exchange rate when you use your credit card for purchases than if you use cash. And then if someone steals your credit card and spends, say, $5,000, the most you can be liable for is $50, and your bank or credit card may be able to get you a replacement overnight, if not sooner. If your debit card is stolen, or you have $5,000 in euros or dirhams in your wallet, and that's taken, you could lose it all and have nobody, other than friends or family who may or may not be able to wire you money, to help you get back home.
So, yes, it's much safer to use a travel rewards credit card than a debit card or cash. If the foreign transaction fees bug you that much, find a credit card that doesn't have them. There are plenty that don't.
Read the fine print to see if the features fit your needs
If you've been zeroing in on a travel rewards credit card, and you like the fact that the annual fee isn't crazy (or it's crazy, but you feel it's worth paying), and you aren't bothered by the foreign transaction fee (or better yet, there is none), and you do travel, and you like all of the perks and amenities, then these extra features we're about to discuss probably shouldn't change your mind. But if you're on the fence on a card, these features may get you to an enthusiastic yes - or the lack of them may bring you to a hard no.
Regardless, do your due diligence and see what your travel rewards credit card offers when it comes to …
Car rental insurance. Do you rent a lot of cars? Do you cringe when you're asked at the counter if you want the car rental's insurance? (It always sounds great to have, but it can significantly jack up the price of the rental.) Many credit cards offer rental car insurance. It generally won't provide as good as coverage as your own car insurance, or the rental car's protection, but sometimes it will cover things like theft and collision or will pick up the rest of your deductible. If you feel like your credit card's car insurance is solid, then between that and your own insurance (assuming you have car insurance), when asked if you want to pay extra for insurance, you may be able to finally confidently tell the inquiring rental car associate, "No, thanks."
Travel interruption/cancellation insurance. Just before you fly out to your brother's wedding, you wind up with walking pneumonia and have to eat the cost of the airline ticket, or fly out there and expose everyone to your germs. Except now in this alternate future, you'll get reimbursed for those tickets - assuming your travel rewards credit card offers good travel interruption or cancellation insurance and you bought the ticket on that card (or redeemed card rewards for the ticket). Unfortunately, sometimes you won't be able to get the full details on perks like these until after you've applied for the card, and they're sending you a guide to all of your benefits. Still, if your travel rewards credit card offers this, whether or not it does everything you'd like, it's a worthy benefit. It could save you hundreds in third-party trip insurance.
Lost luggage insurance. Some cards will pay you up to a certain amount (say, $500) for any lost or stolen luggage while you're on a trip. So you don't want to put your most expensive jewelry or rare coin collection in a suitcase, especially if it's uninsured, but it is a reassuring perk to know that if you have a suitcase jam packed with shirts, sweaters and undergarments, and you lose it all, your credit card can help you out.
Concierge services. These services can be a little like having a personal assistant. A little. You won't be able to get the concierge on the other end of the phone to come to your house and wash your car, but if your request will end with you spending money on your credit card, then, hey, the credit card's concierge is naturally here to help. Do you want reservations at a restaurant? Your concierge can do that for you for free (assuming it's like most cards; read the guide to your benefits). Do you have some sightseeing excursions you want to set up? Your concierge can handle that. Need a hotel room but everything seems to be booked up? Let your concierge worry about that. The spending money snark aside, this can be a wonderful perk for the time crunched.
How to maximize your rewards with a travel rewards card
Now if you're getting to this section, and you follow some of the advice here, and you're excited about it, you probably should apply for a travel rewards credit card. At least you plan on really utilizing it.
Some strategies you may want to consider…
Double dipping. That's when you can use your credit card to get points but also with the same purchase get points in another way. For instance, let's say you get a welcome bonus of 30,000 points. You can put them toward anything you buy, but if there's an online shopping portal that your credit card encourages you to use, and if you get a steeper discount there, you can go there instead and get even more bang for your buck. (Just make sure that what you're buying at the online portal is stuff you need. That's an obvious statement, but it's easy to get excited and carried away over a deal, only to later realize that without the deal in place, you weren't likely to buy the item.)
Or if you pay for your trip with your travel rewards credit card, you might earn loyalty points with an airline or hotel - and then you may possibly be able to also redeem your credit card rewards for a statement credit.
Of if you're shopping at a cash-back site with your travel rewards credit card, you might save money from the cash-back site and rack up points with your credit card. Yet another form of double dipping.
Make sure you're still signed up for brand loyalty and frequent flyer programs. One, this is a good idea anyway if you've been using the program and you have a lot of points you don't want to lose. But even better, some credit cards let you transfer your points to an airline frequent flyer program. So even if your travel rewards credit card isn't an airline-branded one, you may be able to, in effect, make it one by sending those points over to your frequent flyer program.
Keep track of incentives to redeem in specific ways. Sometimes you get more savings if you redeem your points or miles in a certain way. Like maybe it's worth more to redeem your points for cash than it is a gift card. Or maybe if you redeem your points for travel, you'll get a steeper discount than you would if you redeemed them for anything else. You just want to pay attention to how you redeem your points, so you can get the highest bang for your rewards buck that you can.
Use your credit card for purchases in categories in which you earn the most rewards. If you have one credit card, you'll use it to pay for whatever you darn well please, of course, but if you really want to maximize the heck out of the rewards you may want to, say, get a cash-back rewards credit card for bonus points on purchases like those at supermarkets or gas stations and use that card every time you fill up or stock the pantry. Then, use your travel rewards credit card for all of your airline and hotel purchases.
Travel in the off-season. If you can. Many people, especially parents with kids in school, can't vacation any other time but during the summer or spring break or during the end-of-the-year holiday season. But if you can swing it and go on that big vacation in September or January or some other time of the year when few people go get R&R, you'll save money on your vacation - and you can rack up points and discounts with your travel rewards credit card. Plus, those cash-value points will take your further in the off-season.
Be financially responsible. In other words, don't apply for several credit cards if you aren't sure you can manage your money with multiple credit cards. And hopefully this goes without saying, but unless it's an emergency and you have to have cash right now, do not use your credit card for cash advances. Due to the high interest that kicks in immediately, it's just a bad idea. You also want to make sure that you pay your balance in full, every billing cycle.
If you can't pay the balance every time on each billing cycle, you can't. But carrying interest on a credit card is an effective way to undo all the work you've been doing to save money and reap rewards by using your travel rewards credit card.
And it is, in a way, work, making sure that you're maximizing your rewards with travel credit cards. Still, if researching, applying for and using your travel rewards credit card really does wipe you out, the good news is that you can take all of your points and use them to go find somewhere to relax and recover - like on a Caribbean beach.
CardRatings picks the best travel rewards credit cards
So now that you've taken the time to learn about travel rewards credit cards in general, it's time to start researching the actual cards. If you're looking for a place to start, head over to our "Best travel rewards credit cards" for a look at our top choices and why the experts at CardRatings think these are the best the travel rewards credit card world has to offer.