After a period of time that saw many travelers limit or cancel their travel plans, Americans are hitting the road again. According to the U.S. Travel Association, as of October 2023, 54% of Americans said that taking time off to travel was more important than ever.
If you’re a traveler, using a travel rewards credit card could make sense if you’re interested in earning points or miles toward travel. The best travel credit cards can also offer additional benefits beyond travel miles. Still, are the rewards worth more than what you may pay in card fees and interest on monthly balances? Is a travel rewards card always worth having? Read on to find out.
Key Takeaways
- Travel rewards cards are aimed at people who want rewards that can defray travel-related costs.
- When choosing a travel rewards card, weigh the value of rewards earned against the costs of an annual fee and interest charged on a card balance.
- Travel rewards credit cards can help you earn miles or points that you can then redeem for free flights, hotels, and other travel expenses.
- Some travel rewards credit cards offer additional benefits and perks, including airport lounge access, introductory points or miles bonuses, and free checked bags.
- A travel rewards credit card could help you achieve frequent flyer or frequent guest program elite status faster than by using rewards from flights and stays alone.
How Travel Rewards Credit Cards Work
A travel credit card focuses on the accumulation of points or miles that can then be redeemed for travel-related awards. Such awards can include airline flights, hotel stays, car rentals, and more. Airline rewards credit cards typically provide you with miles for the purchases you make using the card, while general travel rewards credit cards tend to give you points. Whether you bank miles or points, cardholders should be able to use them to defray the cost of their travel.
Each card has specific terms for earning and redeeming points or miles. For example, depending on the travel card, you may be able to earn more than a one-to-one return on dollars spent using the card. You might be able to get three times (or more) the dollars spent when you use the card to pay for a flight as compared with the one mile (or point) for every $1 spent on purchases unrelated to travel, such as groceries. This earning rate (and other terms) can vary among cards, so keep that in mind when making comparisons.
Who Benefits Most From Travel Rewards Cards?
A travel rewards card is best for people who travel frequently. Those who fit this category fly and stay in hotels throughout the year. They may be better able than others tobook on slow travel days and during off seasons to maximize their rewards. Their volume of travel also provides more opportunities to make the most of their rewards and extras than are available to infrequent travelers. Others who can benefit from a travel rewards credit card include:
- Business owners: If they travel for work regularly and have a lot of expenses while doing so, they will benefit by using the card often.
- Consumers who pay off their balances every month: This is a good thing to do with any credit card, but it’s especially important with travel cards, as, like any rewards card, they usually have higher interest rates than other credit cards.
The Cost of Monthly Balances
It stands to reason that the more money you charge on a travel rewards card, the more points or miles you’ll get for those purchases. If you pay off your credit card balance monthly, thereby avoiding interest charges, your rewards can be worth more than the cost of having the card, which should be just the annual fee. However, if you don't pay off your balance every month, the interest charges along with the annual fee may end up outweighing the value of the card’s benefits, especially because interest charges compound when you carry a balance from month tomonth.
How can you ensure that you’ll pay the full bill each month? Some consumers limittheir spending to one credit card, making it easier to track against your budget and pay off monthly. Isolating spending can also make it easier to rackup the amount needed to get significant points or miles.
Travel credit cards can also be a good financial dealfor business ownersand the employees who have companycards issued in their names on the account. These cards can allow them to leverage business travel and operational expenses to earn rewards for the business. Of course, it’s the responsibility of the business’ accounting department to pay off the monthly balance to avoid interest charges, and the business owners will set the rules on how rewards can be used.
Many travel rewards card issuers offer online calculators that allow you to estimate the amount of miles or points you can earn each year, based on your typical spending habits. Crunching the numbers can help you decide if the card is worth its cost.
The Cost of Initial Bonuses
Credit card issuers make travel rewards sound like they are free, but they are not. The amount of money you spend to earn rewards, including money related to initial bonus offers, can be a lot, so consider those amounts when trying todetermine whether or not a card is worth its cost. In addition, in some cases, rewards redeemed for cash can end up being taxed by the Internal Revenue Service (IRS).
Let’s do a cost-benefit analysis. One rewards card might offer 40,000 points for spending $3,000 in 90 days. Another might offer the same amount of points for spending $1,000. The lower spending requirementmight sound like a better deal, but higher fees and blackoutperiods associated with the second card could potentially lower its value. Moreover, the spending required for those appealingly hefty bonus points might not fit your budget, and going over budget could cost you a lot in interest charges if you can’t pay off your card. It’s important to measure all features and costs against your individual spending and travel patterns before deciding which card, if any, is worth the cost.
Also, consider whether you’d prefer to earn bonuses in the form of miles or points. If you’re loyal to a particular airline brand, for instance, it could make sense to choose a co-branded airline rewards card that offers a sizable miles bonus.
Even if your cardmember agreement states that there are no blackout dates, there may be other restrictions or limitations on how you can redeem travel points or miles. Read the terms carefully before signing up.
Travel Rewards Card Limitations
Travel rewards cards have terms and conditions just like any other credit card. It’s important to understand how those work when weighing whether travel rewards cards are right for you.
Say you get a travel rewards credit card and plan to use it all year in order to rack up points for avacation. Be aware that airlines and hotels may limit the availability of flights and accommodations for cardholderswho wishto redeemtravel rewards.
For example, there may be travel blackout dates or limits on seat availability that prevent you from booking rewards travel. Peak days and seasons vary among travel brands, so a travel rewards card may not be worth having if you cannot use the rewards points or miles when you need or want to use them.
If you’re interested in a general travel rewards card, check to see if you can redeem rewards by transferring them to partner airline or hotel loyalty programs on a one-to-one basis.
What Is a Good Way to Choose a Travel Rewards Credit Card?
An important first step is to see how your rewards goals fit with the terms and conditions of each card that you consider. The ability of a card to meet your goals can help you narrow the field. It can also provide insight into whether a card is worth the cost of any annual fee. You’ll also want to view your particular spending patterns in the light of how a card rewards you to ensure a high-value fit.
How Do I Get the Most From a Travel Rewards Credit Card?
First, make sure that you understand the best way to utilize credit. Next, check that the card’s terms for earning and redeeming rewards suit your spending patterns and travel desires. Finally, maximize your spending in the categories offering the greatest rewards. Be sure to get your sign-up bonus (though only if you can afford the spending requirement). Take advantage of all the perks to which you’re entitled and ask about getting the annual fee waived (even if just for the first year).
What Should I Look for in a Travel Rewards Card?
To ensure that a travel rewards card is worth having, try to find one with no annual fee, a greater than one-to-one earning potential on purchases, a low APR and/or 0% introductory APR, an attractive initial bonus offer for points, no foreign transaction fee, and a variety of added perks, such as airline lounge access and travel credit.
The Bottom Line
A travel rewards credit card may be worth having, but it depends on how frequently you travel, whether you can afford to charge the amount required to qualify for rewards, if you earn enough in rewards value to justify any annual fees, and your ability to pay off the card balance on a monthly basis. The cards typically benefit people who travel oftenfor work or leisureand can afford to charge enough to earn significant points or miles through one-time bonuses and ongoing purchases.
Be sure to pay attention to the APR and fees. You can also compare bonus incentives from different issuers to determine whether travel rewards credit cards are worth it based on your individual spending patterns.
