How Travel Reward Credit Cards Work
What is a travel rewards credit card?
Travel rewards credit cards are ideal for people who want to earn points from their traveling. Not only do they give you travel perks with the card and a rewards system for travel purchases, but some have perks that act like an airline mile card. Choose the best card to appeal to your travel goals and budget, and you can save big on travel.
How do they work?
Your credit card company is usually going to offer you something like one point or mile for every dollar you spend. Then, like most other reward credit cards, you’ll be able to get extra value from specialty purchases defined at the beginning of your contract. After that, it’s just a matter of cashing in your points and making the most of your traveling.
What are the benefits?
The rewards that you can earn from your daily purchases and savings you can receive from travel perks will leave you with extra money in the end. You can then use that money to improve your experiences when traveling or anything else you may need it for. When traveling abroad, they’re going to save you money if they cancel foreign transactional fees for you. A lot of cards will also have sign up offers, which really come in handy when you’re planning on taking a trip soon after getting the card. It’s just going to be a way to get perks for purchases you may have made regardless. Spending money is technically going to save you money in the long run.
Are there drawbacks?
You’re probably going to need good to excellent credit if you want to apply for one of these cards. It’s also going to take a good bit of research to find the perfect card, as well as additional time when traveling for learning about all of your perks and partnerships you have available. Then there’s also be the chance that those partnerships may limit you on who you can make your travel plans with. It’s a must that you explore all options when putting your card to use to make sure that you’re getting for the best value for your points.
The biggest drawback is that the amount of points and rewards you can earn is determined by how much you’re able and willing to spend on the card each month. If you don’t use the card often, you’re not going to be able to get the best amount of points possible.
Maximize your traveling benefits
- Use this card for your everyday purchases if you want to get more out of your credit card. If you have to buy groceries anyways, you might as well have some hope for your next vacation when it’s time to pay.
- You also want to ensure that you’re paying on time and in full every month. Failing to do this will result in you losing money versus saving money.
- When deciding to open a travel rewards credit card, you should do it about 5 months before your trip. This will allow you to build up some points before you leave, but also go on your trip before you run out of intro offers if applicable. Figure out how long it’ll take for you to build up the points you need for your card and plan in advance for it.
- Not only can you essentially travel for free with your card, but you’re also going to find that your card will get you special perks through your trip. It’s likely your credit card will score you things like checked luggage, rental car discounts, and special hotel deals.
- If you have a few rewards cards to use in addition to the travel rewards card but don’t want to pay several different credit card bills each month, then prioritize the one that fits up with your plans the most. If you’re wanting to take a vacation soon, then start strictly using your travel rewards card for a few months leading up to it.
- Take advantage of less busy travel times. You’ll probably be able to get better prices, and you don’t have to worry about not being able to cash in your points for your desired vacation date.
Choosing the best card for your needs
Two important things to look out for when choosing a card are interest fees and annual fees. You want to make sure that you aren’t going to run yourself into debt while you’re trying to maximize your travel savings.
You should also consider where your loyalties lie when it comes to airlines. If you habitually use a single airline, look into the cards they offer. You may be able to benefit from that more than a card you can use on several airlines. However, if you often just go for the best deal you can find, get a card that you can use anywhere to keep your options open.
If you’re planning on using it for a trip soon, check for which card will allow you to earn the most points or get the most savings in time for your intended date. If it’s soon, you may want a card with an awesome introductory bonus. No annual fee is probably a preference if you really want to stockpile your points.
Find a card whose method of earning rewards best reflects how you spend. Also focus your search on what type of traveling you do. A card with no foreign transaction fees is great for the world traveler, while free checked luggage would be an awesome perk for the long vacation lover.
Pay attention to whether or not the card requires you to spend a certain amount with the card each month in order to access the rewards they offer.
Is it worth it?
If you’re a traveler, a travel rewards credit card is going to be really helpful for you. As long as you’re consistent with paying your bill every month, it’s hard to lose with this card. Sometimes vacations seem impossible, but taking advantage of offers with your credit card makes it easy to see a vacation closer on your horizon.
A travel rewards card is a credit card that carries a travel-related incentive or “reward” for use. The more you use it, the more points that you accrue, the more points you can put towards airline tickets, rental cars, or hotel stays. Below we’ll help you find the best travel rewards credit cards.
Travel reward credit cards are extremely popular and often offer the best rewards value in North America. They also have a tendency of providing considerable sign-up bonuses, exclusive perks, and insurance packages.
While all of those benefits can be great, travel rewards programs can quickly become more complicated than what a lot of people initially assume. One of the ways these rewards can become more complicated is by their offering numerous ways and times that you can actually use your points, be it blackout dates, hotel, or airfare there are a lot of factors customers have to keep in mind. With so many options, making sure that you are getting the best value involves doing some serious research and planning.
Are Travel Reward Credit Cards Worth It?
The best travel reward credit cards have a lot to offer. Many studies have shown that people who pay with plastic spend more than what they would have had they paid with cash. From 15 to 24% more in fact. If appropriately handled – meaning you pay off your balance every month, you stick to your budget – using travel reward credit cards can really pay off. Some Circumstances That Make travel reward credit cards worth it include:
If You Research and Understand How Travel Reward Programs Work & What the Limitations Are
The reality is that different companies have different rules and regulations regarding how long points stay valid and how they can be used. In order to get the most out of your travel reward points, you will want to keep an eye out for points that don’t have a very long shelf life – ideally, getting a card that offers quite a long time period that the points can be used. When collecting travel rewards, it is essential that you have some flexibility in terms of your being able to book around your actual schedule. This makes it significantly easier to use your points.
You Can Stick to Your Budget
When it comes to finances in general, having a budget is a crucial step in having and maintaining control. When it comes to credit cards, the trick is to only use them as a way to pay for items that you were going to purchase already – things you had budgeted for and can pay for.
If you do not stick to your budget, you are at high risk of ending up in financial trouble – and when it comes to travel reward cards having to forfeit your points. Remember, a credit card is not an extension of your paycheck, nor is it free money. It is a loan – a high-interest loan – which you must repay.
Pay Your Card Off in Full Each Month
Over 60% of North American residents carry a balance on their credit cards each month. This means that once time, fees and interest are added the price that you have to pay has increased by upwards of 50%. When it comes to earning travel reward points, they are usually only worth it if you are not actually spending extra money to try and obtain them. If you are, then you should look into merely purchasing your tickets outright and save yourself money on interest.
When you pay a lot of fees or interest on your credit cards, you are actually helping to pay for someone else’s trip. This is because the money to pay for rewards actually comes to the annual fees interest paid by consumers as well as the charges that merchants pay the credit card companies. Do yourself a favor, and save your money, pay for your own trips by paying off your credit card debt each month.
Benefits of a Travel Rewards Card
- If used correctly travel reward cards can make traveling something that users can do more frequently.
- Some travel rewards cards also make it possible to receive extra bonuses such as private airport lounges and priority seating
Drawbacks of a Travel Rewards Card
- As with any credit card, it can be easy to get swept up in the idea of free money, causing the consumer to go further into debt.
- Reward points are not accessible if your card is not in good standing – some cards require the balance be paid in full.
- Some travel reward cards don’t allow points to be used during peak travel times of the year like Christmas, and March Break.
How to Pick the Best Travel Rewards Card for You and Your Needs
When choosing any financial product, it is crucial that you do your research. However, when it comes to a travel rewards card, it is also vital that you be realistic about both your expectations and your spending habits. Here are a few things to keep in mind when trying to decide between multiple travel rewards cards.
Find a Travel Rewards Credit Card with a Low/No Annual Fee
The sad reality is that when it comes to most reward credit cards – travel included – the cards that earn points the fastest for those who use it in a calculated manner, tend to come with high annual fees. However, in order to get the most out of your travel reward points, it is best to use a card that has a low/no annual fee. This is where a lot of people become frustrated because they either don’t spend enough on their credit cards to earn the travel reward points they got the card for, or worse, they spend more than they can actually afford just to earn travel points.
To put it simply, if you are someone who plans to only use your credit card for things in your budget need to use a travel rewards credit card that has either a low or no annual fee in order to really get the most out of your points. If your credit card has a higher yearly fee, you end up spending more on that alone and end up having to earn enough points to offset that fee before the points in order for them to become worthwhile.
Keep in Mind Who You Travel With
Some travel rewards cards only work with specific airlines. If it is not an airline that leaves from your area, or that you like to travel with, then why would you want points that essentially force you to?
Not all travel rewards cards are the same in terms of when points can be used. Many companies are quite specific about the dates or times of year that their travel points can be used. This can be challenging if you have similar regulations as to when you can go away. Take a look at your schedule, and when the various cards you are considering allow the travel points to be used prior to signing up for a card that won’t actually get you anywhere.
Is My Credit Where It Needs to Be?
Every travel reward credit card involves having a credit check done. While this is part of most financial decisions, it is not something that should be taken lightly. Every time a bank or financial institution pulls your credit report, your report takes a hit. Because of this, it is vital that you stay on top of your credit report, making sure there are not any errors and that you know what your credit score is. This will allow you to apply for cards that look for candidates in that credit range. After all, there is no point in taking a hit to your credit score for a card you won’t qualify for.
Travel reward credit cards really do offer a lot of benefits when used in a careful manner. But that doesn’t mean that they are all the same, or should be applied for on a whim. As with any financial product, there are a lot of factors that have to be taken into consideration, will these points actually get me to where I want to go? Am I able to use this card in a mature manner? What is the interest rate that I will be facing should I not be able to pay it off every month? How long do I have to use these points? If you are considering applying for one of these cards, it is essential to sit down, look at your options, and ask yourself these questions prior to applying.
If you are considering applying for one of the best travel rewards credit cards, you have a ton of options to choose from – each with their own details. While there are things like APR, annual fees and billing cycles that you have to consider with any credit card, with a travel rewards card you also have to keep in mind what you really want out of the points, and how to get the most out of them. As long as you are willing to put in the time and effort to research your options, you are sure to find a card that is just right for you and your travel needs.
Good luck and safe travels!
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