Wriggling your toes in the sands of Mykonos. Sipping a sumptuous Barolo in the rolling hills of the Piedmont. Hiking the Inca Trail up the towering slopes that lead to Machu Picchu. They say travel is its own reward and we can’t disagree. But there’s another kind of reward that can get you closer to every fabulous destination that strikes your fancy and even make getting there more luxurious. We’re talking about the kinds of rewards you earn when you use a travel credit card.
The best travel credit cards can put a wide range of perks in your pocket. From frequent flyer miles to free companion tickets to discounts on dining all over the world, each travel credit card company has its own menu of rewards and unique calculus for how travelers can earn them. How do you know which card is best for you? Travel credit cards seem to go out of their way to make that a complicated question. So let’s take a look at how travel credit cards work and help you figure out which card might fit you best and, perhaps, more importantly, whether signing up for a card makes sense for you.
The Number One Thing to Know
If you come away from reading this article remembering just one thing, it should be this. As tempting as it is to use your card to pay for anything and everything—after all, using your card is the only way to earn rewards—you should never build up a higher balance than you can afford to pay off in a single billing cycle. Travel credit cards come with some of the highest interest rates in the credit card marketplace. Depending on your credit rating, a travel card may charge you near 25% APR. Compare that to the average interest rate of all kinds of credit cards, which is closer to 16% APR (and remember that travel credit cards drive that average up.) Carrying a large balance on a travel credit card is a lightning-fast way to rack up debt. We don’t recommend it. In fact, we strongly urge against it. The perks you earn by using your travel credit card will pale in the face of paying hundreds of dollars or more in interest each month on a large balance.
How to Earn Rewards
Here’s another maxim to keep in mind. You have to spend to earn. Beyond that, you have to clearly understand the terms your card offers to reap the maximum benefit from your card. It’s essential that you read the fine print. Some travel credit cards employ pretty idiosyncratic point systems. As you earn more points, you inch closer to earning rewards. Other cards don’t offer points at all. Rather, they reward you with cashback on your purchases. And some cards do a little bit of both.
With some cards, spending in certain categories or with the credit card company’s marketing partners can earn you more points or cashback than spending elsewhere. All other things being equal, you might as well spend in those categories and with those partners. But often all things are not equal. Your credit card may offer more rewards when you fly a certain airline. But you may earn more frequent flyer miles through a different carrier. Or you may want to stay in a more fabulous hotel than the one your travel credit card company partners with.
Your best bet is to choose a card that rewards you for every purchase and look for one that increases the number of points or cash back you get in the categories where you do the greatest amount of spending. One card out there is offering triple the cashback on dining, gas, and even some streaming services right now. Another is offering seven times their cashback percentage for dining at US restaurants. So long as you pay your balance off at the end of the month, there’s no reason not charge your groceries, your Lyft fares, and your golden retriever’s next grooming appointment to your travel card.
The Big Bonus Come-On
Most cards try to earn your business by offering a large upfront point bonus for simply opening an account. But it turns out that it’s not so simple after all. In order to get the points coming to you, most cards require you to meet a minimum purchase threshold, which is often in the $3000-$5000 range. What’s more, you’ll only have a few months—three is pretty standard—to charge that amount to claim your points. If you’re booking then taking a trip, it isn’t necessarily hard to reach the minimum spend requirement. Airline tickets and hotel bills should get you there. But it’s important to time opening your account with the large purchases you intend to make to be sure you actually reap the benefits of that attractive bonus offer. In addition, make sure the bonus you’re earning more than compensates you for the annual fee you may have to pay to open an account. Like other travel credit card fees, those can be quite high, too.
All Rewards Aren’t Created Equal
We’ve talked a little about how to earn rewards. The next step in determining which travel credit card best suits your needs is to compare the variety of rewards each candidate in the running offers. Cashback is probably our favorite—like basic black, it goes with everything. It’s probably the easiest to understand and least cumbersome way to use a travel credit card to fund your next adventure. But it’s your opinion that counts. Rewards run the gamut, from access to airport lounges and first-class upgrades to TSA-pre-check fee reimbursement and free spa treatments. For seasoned travelers who’ve been stockpiling frequent flyer mile for years, miles may be meaningless. But if you’re just earning your wings, those miles can put the wind underneath them. As you’re pondering the perk possibilities, remember to ask yourself what matters most to you.
Travel credit cards compete by trying to make their rewards programs more irresistible than the next guy’s. And they’re always looking for ways to distinguish themselves. One recent innovation in the industry has been the introduction of points transferability. If you already have an established frequent flyer relationship with an airline, for example, some cards will allow you to transfer your points and earn more miles within that program. The same goes for some hotel loyalty programs. Those points can be used to push you over the edge to a free ticket or a few nights of luxury lodging. If flexibility and controlling your own destiny are important to you, a card that offers transferable points may be the right choice.
One Last Trick of the Trade
With high annual fees, minimum purchase requirements, crushing interest rates, and countless rules and restrictions, you may not be convinced that you need a travel credit card in your wallet. Still, so long as you can afford to pay off your balance every month, the rewards really are ripe for the picking. But what if you’re pining to get away and don’t have ready cash to fund your trip? Can a travel credit card work for you? The answer is a qualified yes. But it involves a little bit of maneuvering and it may not be for everyone.
The number of travel credit card offers out there is impressive and perhaps even a little bit overwhelming, But it is probably equaled by the number of credit cards offering a limited period of 0% interest, including on balance transfers. If you can put one of those cards in your pocket before you charge your vacation to your travel credit card, you can transfer your travel card balance to your 0% interest card. Then you’ll have some time—sometimes as long as 18 months—to pay off the cost of your trip interest-free.
A Tip for the Times
The global pandemic has sidelined many would-be travelers. Our hope, of course, is that the skies will open up again soon. But the pandemic has taught us one important lesson about travel: it can be fraught with uncertainty. If you’re shopping for a travel credit card, you may want to opt for one that offers travel insurance—including trip cancellation and travel medical coverage—as one of its perks. It’s not uncommon and, for the moment, might be the most important reward to have.