Frequent flyer programs designed to reward loyal airline passengers have been around for over 40 years. Hotel marketers noted the popularity back then and adopted similar marketing strategies. In the early days, these programs were simple. You earned miles for taking flights on a particular airline and earned points for stays at a hotel chain, and those miles or points were redeemed for a free flight or hotel stay with the airline or hotel you earned them with.
Today, these loyalty programs are more popular than ever, largely due to an abundance of credit cards that help travelers earn bonus points and miles by signing up for a credit card and using that card to make purchases to earn more miles and points. The reward programs have also gotten more complex with most having multiple partners, especially credit card issuers, so it’s important to know how it all works.
So how do you pick the right travel rewards credit card? A lot of people that are new to travel hacking make the mistake of signing up for every shiny new credit card that has an attractive offer.
Before you apply for a card just because it is offering a huge sign-up bonus, read on to learn more about how loyalty programs and travel rewards credit cards work so you can choose a card wisely and actually earn a free trip rather than holding a bunch of miles and points that you might not be able to use.
Most Important Factors to Consider When Choosing the Right Travel Credit Card
There are a lot of things to think about before you jump on a credit card offer that you see online or get in the mail. You need to consider which travel companies you actually use or could use, and what destinations they serve. You should also be familiar with how the rewards program works since all points and miles are not created equal. And you need to keep in mind that you may or may not be eligible for a particular card based on your credit score.
Why Your Credit Score is Important
Most lucrative travel credit cards require an excellent credit score to be approved. Scores generally range from 300 to 850 depending on the scoring model, but the two most popular ones are FICO and VantageScore and an excellent score is generally 720 or higher.
If you don’t know your credit score, start by requesting a credit report from Experian, Equifax or TransUnion. Or you can use a personal finance service like creditkarma.com, which will tell you your credit score. Many banks also provide your FICO credit score through their online portals.
Most credit card issuers will tell you what score is needed to get approved for a particular credit card, but if you don’t see it on the application that information can be found online through other resources.
Evaluating Sign-up Bonuses
Most card issuers these days attract new customers with a big sign-up bonus offer. Be careful about comparing one sign-up bonus to another though. A 100,000-point sign-up bonus offered by one travel card is not the same as that same number of points or miles from another card issuer. They can vary widely in value and usability depending on redemption possibilities.
You should be familiar with how you redeem your points and miles for a particular card, and how many miles or points it will take to earn free travel. It’s a good idea to set a goal for your travel redemption and determine how the sign-up bonus will help you achieve that goal. If you don’t have a particular destination in mind, check the issuer’s site or travel rewards program to give you an idea of how much travel those points or miles will get you.
Earning Points and Miles
With most co-branded travel cards you earn one point or mile per dollar spent on purchases. But many travel cards offer double or triple points on travel depending on the card. Cards also often have other bonus categories like supermarket or gas station purchases that can earn you up to 4x points. Some cards like Chase Freedom and Discover offer rotating bonus categories that offer 5x points. There are also fixed-point value cards like Barclaycard Arrival or Capital One Venture that can earn you up to 2x on all purchases.
To pick the right card and maximize your earning ability, evaluate your spending patterns and the bonus categories offered by the cards you are considering to find the best fit. You should also evaluate the value of the benefits and perks offered to cardholders to make your final decision, but bonus earning can really boost your miles or points balance and help you achieve your travel goal sooner so it’s definitely a big consideration.
Perks and Benefits
The benefits that come with travel rewards cards can be quite enticing. Some co-branded cards come with automatic elite status in the airline or hotel program. Other benefits can include lounge access, travel insurance for missed or delayed flights, and reimbursement or compensation for lost or delayed baggage.
The list of benefits can be quite long, but be sure to review and compare them if you are considering several cards. Benefits and the cost to hold the card can vary widely so make sure the card perks are ones that you will use before making a decision. Lounge access, for example, is not worth it if you don’t travel often or there are no lounges available in the airports you use. And a co-branded card that offers elite status may not be worth it if you only use that particular hotel or airline once a year.
Credit Card Fees
Fees are another big consideration when deciding which card to apply for. Many travel credit cards carry an annual fee because they offer many benefits and bonus earning opportunities. There are some cards that don’t have an annual fee, but they also don’t offer perks during your flight or hotel stay.
Fees generally range from $95 to $550 or more per year for a premium travel card, while some travel credit cards don’t have an annual fee. Like most things in life, you get what you pay for. But if you are not using the extra benefits that come with those fees, then it’s not worth paying to keep the card in your wallet.
The annual fee is often waived the first year as an enticement to sign up, but not on all cards and not all the time, so be sure to check if there is a fee before hitting submit on your application. Also, most co-branded cards have benefits, so check on what you get before signing up to make sure it’s worth it.
If the fee is waived the first year, you can sign up and cancel after the year is up and reap the benefits while you hold it. Be sure to cancel the card before the fee hits or downgrade to another card in the same family to keep the credit line and some of the benefits. Some cards are worth holding as they offer a free hotel night on your anniversary, so keep this in mind when it’s time to pay the annual fee.
Foreign Transaction Fees
When you use your card for travel overseas, there are usually foreign transaction fees of about 3%. The good news with travel credit cards is that many of them waive the foreign transaction fee, but not all. If you travel beyond domestic borders those fess can add up, so this is another thing to be aware of.
When you are considering a new card, you should always check on the program’s redemption options to make sure the points and miles you’re earning give you good value on trade in. Also, while co-branded credit cards transfer the miles and points you earn each month to the program they are affiliated with, points in flexible redemption programs like Chase Ultimate Rewards and American Express Membership Rewards have to be redeemed within the card issuer’s program so you need to be an active cardholder to do so.
Fixed-point value cards like Barclay Arrival and Capital One Venture cards that allow you to erase travel charges on your card by using points, also require you to be an active cardholder in order to do this so make sure you use those points before you decide to cancel the card.
Co-branded cards can only be redeemed for the airline or chain you have signed up with, but there are airline alliances that allow you to use your miles on multiple carriers, so keep that in mind when setting a travel goal.
Availability is another issue. If you want to use the miles you earn to fly to a popular destination during spring break or the holidays, you may not be able to find an award seat or it may cost a lot more because of dynamic award pricing by the airlines.
If you’re flexible with your award travel plans though, then award pricing might work in your favor as they often offer deals during non-peak travel periods and other times when they have excess inventory.
If you’re not flexible with travel plans, then a flexible points program like Ultimate Rewards or Membership Rewards might be a better choice as you can buy travel through their portal using points. Fixed-point cards are also good if you’re not flexible, because there doesn’t need to be award availability to snag a seat, though you will likely pay a premium if it’s a peak travel period or popular destination.
Points can also be used for gift cards or merchandise, but this is generally not considered a good redemption value as the miles or points are usually worth a penny per point or even less.
Will Opening Multiple Travel Cards Hurt Your Credit?
There are a lot of misconceptions about how your credit score is impacted when it comes to opening a new credit card, so let’s talk about that.
You may have heard that a credit inquiry will cause your credit score to drop, and that opening too many credit cards will also have a negative effect.
But if you use the card responsibly and don’t carry a balance by paying your card off every month, then you’ll see that applying for new lines of credit by opening up travel rewards cards can actually help your credit score.
A credit inquiry will usually lower your credit score by about five points, but that comes off your credit report within a few months so the impact is negligible. Also, the credit limit on the card will increase your overall credit availability and that will help boost your score.
Popular Travel Credit Cards
There is a huge variety of travel credit cards, so it’s important to know the differences before you apply for one. If you fly primarily on one airline because they serve a lot of destinations from your home base, or you stay at one particular hotel brand because of its geographic distribution, then a co-branded credit card might be the best choice.
But if you fly on multiple airlines and stay at different hotel chains, you might want a more flexible card like the popular Chase Sapphire or premium Chase Reserve card, which both earn Ultimate Rewards points that can be transferred to hotel and airline programs for redemption or that can be used to book travel through the bank’s booking site. American Express Membership Rewards works in a similar way, as does the Citi ThankYou program.
If you’re a beginner though and all of this is making your head spin, then a fixed-point rate card like Barclaycard Arrival or Capital One Venture might be a good place to start. The earning scheme is simple because everything earns 1.5 or 2x per dollar, and you trade your points in for a penny per dollar after you’ve made your purchase.
Hotel Rewards Credit Cards
Major hotel chains like Hilton, Hyatt and Marriott all offer multiple levels of personal cards and business cards as well. If you travel often and stay at brands within the same hotel chain, then getting one of these cards is a no-brainer because of the perks you’ll get and the bonus earning power.
Most hotel chains have multiple brands in their portfolio and they don’t always carry the chain’s name that you may be familiar with, so check the hotel chain’s website to see what properties are included.
Airline Rewards Credit Cards
Most major airlines like American, Delta and United also offer co-branded cards. If you fly the same airline most of the time, it’s a good idea to get the co-branded card affiliated with that carrier.
And similar to hotel chains that have multiple brands where the card will offer perks and earn bonus points, airlines belong to alliances that also allow you to earn and redeem miles with other carriers. There are three major alliances: Oneworld (includes American Airlines and 13 other carriers), SkyTeam (which includes Delta Air Lines and 18 other airlines) and Star Alliance (which includes United Airlines and 25 other carriers).
Also, keep in mind there are usually several different cards for each airline or hotel with different fees and benefits, and they can be offered by different banks with different payment processors like Visa and American Express so keep that in mind if you decide to get a co-branded card.
There are also popular cards like the Capital One Venture card that offer mileage earning abilities, but these are not real miles in an airline program. They are fixed-rate credit cards that let you trade in your “miles” at a penny on the dollar for airline fares and other travel.
How to Keep Your Credit Cards Safe and Accessible When You Travel
Once you’ve taken the plunge and gotten a travel rewards credit card or two, it’s time to channel your spending to those cards. Since many travel credit cards offer bonus points for travel spending as well as other perks on the road, it’s a good idea to take it with you. But it’s also a good idea to keep your card safe as you would at home.
All your credit cards don’t need to go on the trip with you, so choose which ones you need and be sure to bring the ones that offer perks during your flight or stay. Remember to let your card issuer know you are traveling so your travel charges don’t get flagged as fraud. This can lock your card and ruin your vacation, so it’s always a good idea to have an alternate card in case this happens. If you have multiple cards that have different bonus points categories, bring the ones that you think you’ll use on your trip.
Be sure to check the charges on your statement or the bank’s website if you are worried about excess or fraudulent charges. And it’s best to avoid having the restaurant you are dining at or the merchant you are purchasing from bill you in US dollars. You might be tempted to find out on the spot how much something costs in your own currency, but you’ll pay for that privilege as the exchange rate used is generally higher than your bank will charge. And if you have a card with no foreign transaction fees, then there is no fee for the currency conversion.
There are also wallets that have radio frequency identification (RFID) technology that will block your card from being read by scammers, though this kind of crime is not widely reported. And there are mobile payment apps like Apple Pay, Google Pay and PayPal for contactless payments that allow you to keep your credit card safe in your wallet.
Once you have successfully applied for a credit card, the clock starts ticking on the 90-day window to meet minimum spend to get the sign-up bonus, so be sure to keep track of your spending to ensure you hit the minimum spending requirement to secure the points or miles you were promised when signing up.
If you don’t spend enough monthly to meet the minimum spend required, be realistic about what charges you can put on the card to get the bonus. Minimum spend can be anywhere from $1,000 to $5,000 depending on the card.
Timing is one consideration when trying to meet minimum spend to earn the bonus. If your spend increases around the holidays, it’s a good idea to apply before you start your holiday shopping. Or time your application so it coincides with big purchases or bills like an annual insurance premium. Also, keep in mind that you can pay a utility bill in advance if you are falling short.
Don’t buy things you can’t afford. If you end up carrying a balance on your card, the interest charges will negate the value of rewards earned. But if you apply for the right card and use it strategically to maximize benefits and earning power, you can be taking a free flight or getting a free hotel stay within months depending on the size of the bonus and how much you spend on the card, which is one of the biggest reasons that travel rewards credit card are so popular these days.
Finally, don’t let your points or miles expire. You can use a service like awardwallet.com to track your reward program miles and points or keep track of them in a spreadsheet. Most loyalty program miles and points will expire in a year or two if you don’t fly or stay at the chain. But if you have a co-branded credit card and make a purchase that will reset your expiration date, which is another good reason to have a co-branded card.