You thought you had the best travel credit card.
Then, you see an ad on TV and you begin to wonder. That one sounds better than yours. Or, does it? You’re confused.
Maybe you should get both. How do you know?
Recently, I was asked to collaborate with U.S. News & World Report regarding travel credit cards. As a nationally recognized publisher of consumer advice and information, they conducted a nationwide study of consumers who own credit cards.
From this study, they created a guide which shows travelers how to best use their cards and get the most from them.
Finally, something that compares cards and gives me information that makes sense.
Throughout the next month I will post results from that study. Hopefully, you will learn something about your credit card.
The link to the entire study is https://creditcards.usnews.com/travel#heading2
Is a travel credit card right for you?
Make sure you meet these requirements before signing up for a travel rewards credit card.
- You travel frequently. If you don’t consistently spend on airfare, hotels or other travel expenses, consider a cash back credit card instead. They have fewer limitations on redemption and might save you the cost of an annual fee.
- You have a good credit score. You have the best chances of being approved for a travel credit card if you have a FICO score of at least 700.
- You pay off your balance each month. Because travel credit cards have higher-than-average APRs, you should only get a travel card if you can pay off your balance each month.
To find a travel card that meets your needs, evaluate each card using the following criteria:
- Pick the right rewards program for you.
- Calculate earning potential.
- Factor in sign-up bonuses.
- Calculate redemption value.
- Subtract annual fees.
- Understand travel benefits.
- Avoid foreign transaction fees.
1. Pick the right rewards program for you.
Your travel credit card will work either in conjunction with the loyalty program of an airline or hotel chain or with the rewards program of the bank or credit card company that backs it. Each program has its benefits as well as unique terms and conditions for earning, redeeming and transferring points.
Loyalty airline programs
For some travelers, their loyalty to any particular airline lasts only as long as that airline offers the cheapest flights. But frequent flyers are often willing to forgo initial cost savings in exchange for benefits down the road. Which airline’s program works best for you will depend on several factors regarding the loyalty program and the airline itself.
Popular airline programs:
- Alaska Airlines Mileage Plan
- American Airlines AAdvantage
- British Airways Executive Club
- Delta SkyMiles
- JetBlue TrueBlue
- Southwest Rapid Rewards
- United MileagePlus
- Virgin America Elevate
Loyalty hotel programs
When you look for a hotel, do you prioritize value or luxury? The answer will help you determine which hotel rewards program is right for you. As with airline loyalty programs, your earned points may only be eligible for redemption with one hotel chain and its affiliate partners. Some hotel rewards programs have partnerships with other brands, such as Marriott Rewards, which allows members to redeem and earn points with The Ritz-Carlton Rewards program.
Popular hotel rewards programs:
- Club Carlson
- Hilton Honors
- World of Hyatt
- Kimpton Karma Rewards
- Fairmont President’s Club
- Omni Select Guest
- IHG Rewards Club
- Marriott Rewards
- The Ritz-Carlton Rewards
- Starwood Preferred Guest
- Stash Hotel Rewards
- Leaders Club
General points program
Using a general travel credit card enters you into the rewards program for the bank or credit card company that backs it. While you will have access to the broader redemption platform for that provider’s network of credit cards, you’ll still receive the best value by redeeming for travel through the platform or using the platform to receive statement credits for travel purchases made on the card.
- Barclaycard Arrival Miles
- Capital One Miles
- Chase Ultimate Rewards
- Discover it Miles
- US Bank FlexPerks
- Go Far Rewards
Maximizing your rewards means matching your goals and habits with the appropriate type of travel rewards program. If you want deluxe benefits that come with elite membership status, an airline or hotel card is the way to go.
However, if you don’t travel as often and want maximum flexibility when you do, as well as a broader range of earnings categories, a general travel card is usually the smartest choice for your first travel card. Frequent flyers often find that adding a second, cobranded loyalty card to their wallet makes sense once they’ve established a favorite airline or hotel chain.
2. Calculate earning potential.
Travel cards earn rewards at different rates for spending in different categories, so you have to analyze your spending habits to determine which card will help you maximize your points. A good travel card will have a range of purchases that qualify as travel spending. These purchases can include:
- stays at hotels, motels, timeshares and campgrounds
- car rentals
- buses, taxis, limousines and ride-hailing companies like Uber and Lyft
- parking lots and garages
- bridge and highway tolls
- meals and other nonlodging expenses at hotels
Depending on the type of card, these purchases can earn between 1.5 and seven points. The highest points tend to come with hotel cards, while airline cards typically award double to triple miles for flight purchases. All other purchases, often referred to as everyday spending, typically earn between one and two points per dollar spent.
3. Factor in sign-up bonuses.
The most lucrative travel cards offer bonus points to those who meet a certain level of spending by a specified date, usually within three to six months. These bonuses can be worth hundreds of dollars. For example, the Southwest Airlines Rapid Rewards card offers 50,000 points when you spend $2,000 in the first three months, and the BankAmericard Travel Rewards card offers 20,000 points when you spend $1,000 in the first three months.
4. Calculate redemption value.
Every travel card carries a rate at which points or miles are awarded. However, what those points are worth to you depends on the value you derive from redeeming them, as well as your preferences and priorities.
For general travel cards, point valuation is simple math: your number of points multiplied by the redemption rate, often a rate of 1 cent to 1 point. On the surface, award travel with airlines or hotels is also straightforward: The typical cost of a flight or room is divided by the number of miles you need to book an award flight or stay.
But airlines and hotels frequently adjust the price of award travel based on award level, award availability, time, destination/location, fare/hotel class, demand and other factors. All of these changes will affect the value of your miles, making valuation for airlines in particular “extremely complicated,” according to Dubash. “You’ll see estimates all over the place.” He and Cortez both cite 2 cents per mile as a general standard for miles with the major airlines, while the value of miles with smaller airlines like Southwest and JetBlue may fluctuate higher or lower than 2 cents.
Other factors that affect the value of your rewards program include:
- whether there are fees for checked bags, foreign transactions, etc.
- whether your points can be transferred to another loyalty program and at what ratio
- how easy it is accrue and redeem points and whether you face blackout dates, seat restrictions or other limitations
- the quality of perks available to you once you reach top-tier elite status
5. Subtract annual fees.
Credit card companies entice new users by waiving the annual fee for the first year, which typically ranges from $40 to $95, although it can go as high as $450 per year. Once the fee kicks in, be sure you’re earning enough rewards or enjoying the other card benefits to compensate for it. For example, the Barclaycard Arrival Plus World Elite MasterCard’s $89 annual fee activates in the second year, but you might easily save that amount through the card’s discounts on car rentals, vacation packages, charter flights or flights with one of its airline partners.
There are also excellent cards on the market that don’t carry an annual fee. For example, the Discover it Miles card is a no-fee card that doubles users’ rewards at the end of the first year of use, has no foreign transaction fees and offers a flat 1.5 percent rewards rate on all purchases, including nontravel expenses.
6. Understand travel benefits.
Travel benefits can be practical tools, discounted pricing or luxe perks. Common benefits include no foreign transaction fees, access to 24/7 concierge or customer service lines, free baggage and travel insurance. For example, the Chase Sapphire Preferred card comes with trip cancellation/interruption insurance, lost luggage reimbursement, car rental theft and collision coverage, baggage delay insurance, trip delay reimbursement, 24/7 customer service and more.
The Southwest Airlines Rapid Rewards Premier credit card and Business credit cardprovide A-list status users with priority check-in and boarding, free same-day standby and dedicated customer service. Members of the top two tiers can get free in-flight Wi-Fi and free flights for a friend every time they fly.
The Marriott Rewards Premier credit card comes with zero foreign transaction fees and a free night stay every year after your account anniversary. Members at the introductory level get free in-room internet, while the upper tiers promise lounge access and breakfast, free room upgrades, guaranteed room availability, late checkout, elite customer service lines and arrival gifts.
7. Avoid foreign transaction fees.
The best travel cards don’t charge a foreign transaction fee, which is typically 2 to 3 percent on every purchase. Since these fees can be greater than any rewards you earn, frequent overseas travelers will want to make this card feature a top priority.