Are they worth it?
Travel rewards credit cards might seem like a good idea on the surface. They all work in a similar fashion—you earn points or miles for every dollar you spend on your credit card purchases. Some cards will offer more points or miles depending on the type of purchase, like restaurant dining and transportation purchases. Some cards offer additional perks, like free checked baggage or access to airline lounges. Simply put, not all travel rewards cards are created equal and not all consumers will benefit from such a card.
Are you a Frequent Traveler?
A lot of the value of travel rewards credit cards are in the perks associated with the card beyond miles or points. Free checked baggage can save you $50 or more per trip, and access to premium upgrades at hotels, car rental locales, as well as in-flight can be valued anywhere from $100-$500. Frequent travelers will enjoy the perks more than those who travel only once a year. The perks alone can make a card worth it, even without the points.
If you are an infrequent traveler, a card like this probably won’t pay off in the end. Most travel rewards cards have an annual fee—ranging from $50-$150 a year—and generally, have a higher interest rate than other cards. The cost of the card is offset for frequent travelers in the perks they accumulate along the way, but infrequent travelers are unlikely to use enough of the perks to offset the cost of keeping the card active.
Understanding Points and Miles
A lot of travel cards call their points “miles” and you receive one for every $1 that is spent, in many cases. The actual value of the point is somewhere around 1.5 cents. In order to rank up enough points to pay for a $450 ticket, you’ll need to spend about 30,000 on your credit card.
Again, the main draw of these cards are the perks associated with them while traveling, so those traveling regularly for pleasure or business will find comfort in those perks. If you are traveling monthly for your job, having a free upgrade to a larger seat or having access to a comfortable lounge can be a great way to relieve the stress of travel. If you are someone who only travels once or twice a year for vacations, these perks, while nice, just don’t make up for the interest you are spending and the number of points you are actually accumulating.
The Verdict
Because travel rewards credit cards are crafted with the traveler in mind, they are a great credit card for those who are regularly moving around the country or the world. Jet-setters will enjoy the perks and will gain points as they travel and use their card. For frequent travelers, looking for a card with a low-interest rate and annual fee, and a high initial points bonus is the best way to see the value in your investment. Entry level rewards cards generally don’t offer the same benefits as higher tier cards, so look for a gold tier card if you plan to utilize travel cards.
For the infrequent traveler, you are better off getting a cash-back credit card and storing the money away for your own travel plans. Cash-back cards allow you to use earned money toward whatever you want, and often don’t have the annual fee associated with the travel rewards credit cards. Interest rates are often lower, too. When searching for this type of card, it is best to look for one with a 0% interest introductory offer and no annual fee.
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