How do Travel Credit Cards Work?
Travel credit cards are a type of credit card that offer rewards and benefits tailored specifically for travelers. Unlike regular credit cards that may provide cash back or generic points/miles, travel credit cards allow you to earn rewards that can be redeemed for airfare, hotel stays, rental cars, cruises and more. The rewards you earn are typically most valuable when used for travel purchases. Travel credit cards also come with travel-focused perks like free checked bags, airport lounge access, trip delay insurance and more. They are designed to maximize the value of your rewards and enhance your travel experience.
Main benefits of Travel Credit Cards
Earning Travel Rewards – The main appeal of travel credit cards is the ability to earn points or miles that can be redeemed for upcoming travel expenses. Most travel cards offer bonus rewards on purchases made at restaurants, gas stations, grocery stores and other common spending categories. Some co-branded airline and hotel cards allow you to earn points directly with the travel provider.
Redeeming for Travel – Unlike cash back, the points and miles earned with a travel credit card are meant to be redeemed for flights, hotels, rental cars, cruises and other travel expenses. Points can often be transferred to various airline and hotel loyalty programs, giving you flexibility in how you redeem them. This allows you to maximize the value of your rewards.
Travel Perks – Beyond earning rewards, many travel credit cards come with complimentary benefits that enhance your travel experience. These can include free checked bags on flights, priority boarding, rental car insurance, airport lounge access, trip delay coverage and more. The perks offered will vary by card.
Sign-up Bonuses – Most travel cards offer large sign-up bonuses like 50,000 points after meeting a minimum spending requirement. Sign-up bonuses give your reward balance an initial boost.
No Foreign Transaction Fees – Having no foreign transaction fees is common among travel rewards cards, saving you 3% on purchases internationally.
The combination of high-value rewards, travel perks and sign-up bonuses make travel credit cards a beneficial option for frequent travelers who want to get the most out of their spending. Just be sure to pay off your balance each month.
How Do Travel Credit Cards Differ From Regular Credit Cards?
Annual fees
One key difference between regular credit cards and travel credit cards is that most travel cards charge an annual fee, usually around $95-550 per year. This is because travel cards offer premium rewards and benefits that justify a fee. Regular credit cards aimed at consumers with fair credit often have no annual fee. However, for those with excellent credit, premium regular cards may charge an annual fee as well. The fee on a travel card allows issuers to offer richer ongoing benefits.
Rewards and points systems
Travel cards offer rewards systems tailored specifically for travelers, letting you earn points or miles that can be used for upcoming trips. Most regular credit cards simply offer cash back, which lacks the flexibility and upside of travel rewards programs. With travel cards, you can redeem points for flights, hotels, cruises and more. Many allow transfers to various travel partners to increase redemption value. You may even earn bonus points on travel purchases. Regular cards don’t offer travel-centric redemption options.
Travel perks and protections
From rental car coverage to airport lounge access, travel credit cards are packed with perks and protections to enhance your trips. For example, cards may offer free checked bags on flights, priority boarding, trip delay reimbursement, lost luggage coverage and access to airport lounges. Things like extended warranty and purchase protection are also common. Regular cards lack most of these travel benefits. The combination of rewards and perks make travel cards invaluable for frequent travelers worldwide.
Types of Travel Credit Cards
Airline credit cards
Co-branded airline cards: Co-branded airline credit cards are tied directly to a specific airline and offer rewards that can be redeemed for flights on that airline. For example, the Delta SkyMiles Credit Card from American Express lets you earn Delta SkyMiles. These cards also offer perks with the affiliated airline like free checked bags, priority boarding, discounted companion tickets, and more. The value is highest for loyal customers of that airline.
General travel rewards cards: General travel rewards cards aren’t tied to any one airline. Instead, they earn flexible points or miles that can be transferred to various travel partners or redeemed through the card issuer’s travel portal. For example, the Chase Sapphire Preferred lets you earn Chase Ultimate Rewards points that can be transferred 1:1 to airline and hotel partners. The redemption options are more flexible.
Hotel credit cards
As the name suggests, hotel credit cards are co-branded with a hotel chain and offer rewards that can be used for free hotel nights, room upgrades, on-site dining, and more. For example, the Hilton Honors American Express Card lets you earn Hilton Honors points for stays at Hilton properties. Perks may include complimentary elite status, room upgrades, late checkout, and other VIP benefits. These cards cater to frequent guests of that hotel brand.
Premium travel cards
Premium or luxury travel cards have annual fees starting around $400-550 but come with high-end rewards and elite travel benefits. Perks can include airport lounge access, luxury hotel status, $300+ annual travel credits, TSA PreCheck/Global Entry credits, and more. Points earned are extremely valuable when redeemed for first & business class flights and luxury hotel stays. Examples include The Platinum Card from American Express and the Chase Sapphire Reserve.
The variety of travel credit cards offer options for all types of travelers and redemptions. Choosing one tailored to your habits and goals ensures you get maximum value.
Key Factors To Consider When Choosing A Travel Card
Your travel habits and goals
When choosing a travel credit card, consider your regular travel habits and goals. For example, if you frequently fly with a certain airline, an airline co-branded card like the Delta SkyMiles Credit Card could be beneficial. If you stay at Hilton hotels for work trips, the Hilton Honors Card may be a better fit. Think about your upcoming travels and what points or miles would be most useful. Also set travel goals for the next 1-2 years. Do you want to fly business class to Europe or stay at an overwater villa in Bora Bora? Matching your card to your goals ensures you earn the most relevant rewards.
Annual fees
Most travel cards have annual fees ranging from $95 up to $550 for premium cards. The perks and rewards offered should outweigh the annual fee. Make sure to compare cards with similar fees and redemption values. Some cards offer statement credits or waived first year fees to offset the annual cost. Also consider your monthly spending and if you can earn enough rewards to justify the fee.
Rewards value and redemption options
Travel cards vary widely in how rewards are earned and redeemed. Compare points systems, earnings rates, and redemption options. Some cards offer high-value airline or hotel transfers while others only allow booking through the issuer’s site. Look for flexible points that can be transferred to multiple partners. Also assess if the redemption values provide at least 1-2 cents per point in value. Factor in sign-up bonuses too.
Travel perks and protections
Factor in the travel benefits and protections offered by the card. Does it offer free checked bags, rental car insurance, airport lounge access or Global Entry credits? What about trip delay coverage, lost luggage reimbursement, extended warranty and other buyer protections? The combination of rewards and perks make travel cards so valuable for trips.
Assessing these key factors will help you find the right travel credit card tailored to your spending and travel habits.
Maximizing Your Travel Credit Card
Meeting minimum spend for sign-up bonus
One of the best ways to maximize a new travel credit card is to meet the minimum spend requirement for the sign-up bonus within the required timeframe, usually 3 months. Sign-up bonuses offer a lump sum of points/miles like 50,000 after spending $4,000 in 90 days. Plot out how you’ll hit the target through regular spending. You can prepay utilities and other bills. Also consider making large purchases you were planning to make anyway like furniture or a laptop.
Strategically earning points/miles
Take advantage of bonus earning categories each month to boost your rewards earnings. For example, some cards offer 3x points on travel and dining. Track your spending to estimate points earned. Be strategic about when you use your travel card versus other ones in your wallet to maximize bonuses. Consider getting cards that complement each other like one for dining and one for groceries and gas.
Transferring points to travel partners
Many travel cards allow transferring points to various airline and hotel loyalty programs. This allows you to maximize the value of your rewards. Always compare transfer ratios and redemption options before transferring points. Transfers to hotel programs can often get you the highest per point value for premium hotel stays.
Boosting points with shopping portals
Most travel rewards programs are linked to shopping portals that let you earn extra points for online purchases. Log into your frequent flyer accounts and click through the portal before shopping online. The extra 2-5x points on top of your regular credit card earnings really adds up.
Downgrading after first year
Before your annual fee hits in year two, consider downgrading your travel card to a no annual fee version if available. You keep your account history and earned rewards. Then reapply for the premium card to earn the sign-up bonus again. This allows you to rotate sign-up bonuses every couple years while avoiding unnecessary annual fees.
Common Mistakes To Avoid
Paying annual fee after first year
One mistake to avoid is paying the annual fee after the first year if the value no longer outweighs the cost. Before your second year annual fee hits, assess if you’re still getting enough value from the card. Compare the fee to the dollar amount of rewards you earn. Also factor in utilized benefits like lounge access and travel protections. If the math no longer adds up, call to cancel or downgrade to a no annual fee version if available. This avoids paying unnecessary annual fees while still keeping the account open.
Not meeting minimum spend
Failing to meet the minimum spend for the welcome bonus is a common misstep. The minimum spend is usually $3000-4000 within 3 months of account opening. Plot exactly how you’ll make the required purchases in that timeframe through regular spending, bills and necessary big purchases. Don’t overspend solely to meet the requirement. Also be sure to track your progress. Missing out on a 50,000 point bonus significantly decreases the first year value.
Letting points expire
Many points and miles programs have expiration policies, usually between 18-24 months of account inactivity. Always check your account frequently and make note of when your points will expire. Set calendar reminders if necessary. Before points expire, be sure to either use them for redemptions or perform some account activity like earning or redeeming a single point. This resets the expiration clock. Losing hard-earned points due to inactivity is an easily avoidable mistake.
Overspending to earn rewards
While many travel cards offer enticing bonus categories, you should never overspend just to rack up more points. The key is strategically using your travel card for purchases you’d make anyway. Spending beyond your normal budget just to earn extra rewards negates the value received. Maintain your financial diligence if chasing credit card benefits. Stick to your budget and use bonus categories to maximize your normal everyday spending.
