You’ve probably heard of travel credit cards or travel rewards cards, but you may not be clear on how they work. These cards pay you points or miles for making both travel purchases and everyday purchases. Once you accumulate enough points or miles, you can redeem them for rewards like flights and hotel stays.
If you travel often, one of these cards can be a smart financial tool. Thinking of applying for a travel credit card? Here are the basics of travel credit card rewards to get you started.
An overview of travel credit cards
Travel-specific credit cards work similarly to any other rewards credit card: When you make charges, you earn currency at different rates that can be turned into rewards.
Currencies vary from card to card, but are generally called “points” or “miles.” For example, most airline cards pay miles in that airline’s loyalty program. Hotel credit cards and general travel cards usually pay you with points. Both types of currencies are redeemable for travel and other rewards.
Typically, a travel credit card will pay you extra in its currency when you use the card to purchase travel, but rates vary. One card might offer you 2 points or miles per $1 spent on airline purchases, while another might offer you 3 points or miles per $1 spent on airline purchases.
Many travel rewards cards also pay points or miles on everyday non-travel purchases, but usually at a lower rate — for example, only 1 point or mile per $1 spent.
By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.
What types of travel credit cards are out there?
These are some common types of travel points credit cards.
Typically speaking, the higher the annual fee, the more built-in travel benefits you can expect from the card.
Your card might also come with perks like a free night each year you carry the card or automatic elite status in the hotel’s rewards program.
Flat-rate travel credit cards are simple and easy to use. You’ll earn a certain number of points or miles on every purchase, and there are no spending categories to keep track of, and it’s less confusing to earn rewards.
Common benefits of travel credit cards
Some of the most popular travel credit cards offer several added benefits, like:
-
No foreign transaction fees: Some credit cards charge foreign transaction fees when making purchases in other currencies while abroad, others do not.
-
Trip cancellation or trip delay insurance: Your trip may not go as planned. A card with built-in travel insurance can reimburse you when your plans change due to qualifying reasons.
-
Baggage delay or lost baggage insurance: Travel credit cards may include coverage for baggage interruptions. This way, if your bag is lost or delayed for a lengthy time, you can purchase toiletries and/or clothing and get reimbursed.
-
Travel credits: A travel credit card may come with travel credits, which allow for a specific dollar amount of travel expenses to be offset by a statement credit.
-
TSA PreCheck/Global Entry application fee credits: Some travel cards offer application fee credits for TSA PreCheck or Global Entry. If you use your card to pay these application fees, you can earn statement credit for reimbursement.
How do travel credit card rewards work?
Cardholders collect points or miles until they’re ready to redeem them for rewards, and redemption options will depend on the card that you have. You can generally redeem travel credit card rewards for flights, hotel stays, vacation packages and more.
Several credit card issuers deposit miles or points directly into your account with the accompanying airline or hotel loyalty program, whereas other credit card issuers host their own online shopping portal for travel rewards.
A few credit card issuers will let you transfer your points to partners, which can include other airlines, hotels and car rental agencies. In most cases, you start at the card issuer’s online portal to transfer these points. Once your points have transferred to another loyalty account, you can book award travel directly through the hotel or airline loyalty program. In general, these types of points give you more flexibility for redemptions.
Examples of how redemptions and earning rates vary
Here are just a few examples of some of the variances you’ll find across travel credit cards:
-
Chase Sapphire Reserve®. You can use your Chase Ultimate Rewards® points to book travel on Chase’s travel portal or you can transfer your points to one of over a dozen partners. The points can have a higher value when they’re redeemed via the portal.
-
IHG One Rewards Premier Credit Card. With this IHG card, you can earn 24 points per dollar spent at participating IHG hotels, but will only earn 5 points per dollar spent on car rentals, gas stations, grocery stores, flights booked directly with the airline and restaurants. All other purchases earn 3 points per dollar.
What to look for in a travel credit card
There are many travel credit cards available. When choosing any financial product, always consider your personal goals and purchase habits. This can help you narrow down the right product for you.
Here’s what to look for when comparing travel credit card options:
-
Bonus offer: Many credit cards offer a sign-up bonus to new cardholders — usually a chance to earn a large number of bonus points after spending a certain amount on the card in the first few months after opening the account. Compare these offers and their points value before choosing a card.
-
Earning potential: Not all travel credit cards offer the same earning potential. Look to see how each card rewards points or miles, and don’t forget to consider purchase categories. Also, check to see if the earning potential is unlimited, as you’ll want to maximize your earning potential. For some, choosing to get a flat-rate travel credit card may work best.
-
No foreign transaction fees: If you travel internationally, check to see if the card charges foreign transaction fees. This way, you don’t get charged extra fees when using your card.
-
Perks: Extra travel benefits, like priority boarding for your flight or a welcome gift at your hotel can make your travels more enjoyable.
-
Annual fee: Some travel credit cards charge an annual fee, others don’t. It’s essential to understand the annual fee before applying for a credit card to make sure you can comfortably afford it. Travel cards with more perks may have a higher annual fee.
Which travel cards are recommended?
You have several excellent options to choose from when deciding which card to get, like:
If you’re considering a travel credit card
Now you know how travel credit cards work. They can be very worthwhile — after all, you may as well earn rewards for travel purchases and other expenses that you’re already charging to your card.
How to maximize your rewards
Source: www.nerdwallet.com
