This is a guest post by Kevin Fleming. If you want to guest post on Go Backpacking, please read more here.
One of the best perks of credit cards these days, particularly for those who travel frequently for work or for pleasure, are the travel rewards points that can be earned for using the card. These travel rewards break down in very different ways. For example, some airline credit cards offer free airfare for an individual or family on hundreds of different airlines. Others allow you to accrue points to use toward “frequent flyer miles,� which may also be used on a number of airlines.
True travel reward cards allow you to use the points that you earn toward flights, hotel stays, cruises, and rentals of vehicles while you’re away on business and vacation. All of these offers sound extremely attractive; however, choosing the best travel rewards card is easier said than done. Consider your options when you think about what credit card to spring for.
What Are You Looking For?
Resist the urge to let your ears perk up every time you heard the words “travel rewards.� The word may mean very different things depending on what card you’re looking at. For example, many cards have relatively expensive yearly fees, but only offer travel rewards on certain expenditures, such as travel charges you put onto your card over the course of a year.
If you’re already traveling frequently, this might work out great for you. However, if you’re trying to save points toward a hotel stay or a flight by putting minimal grocery charges on your card, chances are your savings won’t amount to much.
Also consider the amount of money that you plan on putting on your card. Sometimes, travel rewards amount to a mile for every few dollars that you spend. For a round trip from coast to coast, you’ll have to spend thousands of dollars in a year.
Compare Discounts
If the first credit card you see seems particularly attractive to you, keep it in mind, but keep looking. You could certainly find the best deal right off the bat, but a bit of research will do you better. Compare the rewards programs offered by each card, the APR on each, the monthly fee. Look up reviews online and see what customers have to say about their customer service and security features. Consider the line of credit you’ll be offered. Above all, find the card that caters to your needs. If you make the best choice, the card will work for you, not the other way around.
Don’t Choose Based Only on Rewards
Travel rewards credit cards sound great, until you factor in a 25% interest rate. Many travel card companies will try to reel you in despite an exorbitant annual percentage rate, encouraging you to spend more money than you normally would on your card to try to get the most “savings.� Others have an extremely high annual fee.
Again, sometimes these cards can be worth it—for example, if you put ten, twenty, or thirty thousand dollars a year on your credit card—but for most people, they’re not. If the rewards look too good to be true, they probably are. Check out the interest rate (for the first year and successive years), the annual fee, and the amount of benefits you’ll reap for the cost you’ll have to put out. Use a calculator, don’t estimate. It comes down to dollars and cents.
To be successful with rewards credit cards you MUST pay off your balance in full each month. Carrying a balance, regardless of the interest rate will end up costing you more then any rewards that you can earn. Before applying for a travel rewards card make sure that you will be able to use the card responsibly and when you receive your card make a note of when your payment is due each month.
Considering Your Card Options
While there are literally hundreds of travel rewards cards, here are a few examples of the types of cards you might look at. Notice how the benefits, interest rates, and annual fees stack up against each other.
1. Escape by Discover:Â This is one of the best travel cards out there and allows you to earn 2 miles for every dollar you spend on all of your purchases. This card has a fairly low annual fee of $60 (compared to the $140 annual fee of the Visa Signature card). The reason I really like this card is the fact that you can redeem your miles for airline tickets, hotel rooms, OR cash. The rewards program is much more unrestrictive then some of the other travel rewards cards out there.
2. Starwood Preferred Guest Card: If you go for this credit card, you’ll earn a 10,000 point signup bonus, and $15,000 gets you an extra 15,000 points. You’ll receive free hotel stays for the points that you earn. You can also transfer points to frequent flyer programs.
3. Visa Signature Platinum Class:Â While this card has a fee of $140 annually, it also has a number of attractive features to consider: 30,000 miles after only $250 in purchases, and elite qualifying miles (one per dollar spent, $5,000 after opening the card, and other perks).
It’s important to find a card that fits your lifestyle and will allow you to earn the maximum amount of points based on the type of purchases you make on a day to day basis. I know people who are able to pay for most, if not all of their vacation every year with credit card rewards, it’s just a matter of finding the right card and using it responsibly.
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About the Author: Kevin Fleming runs CreditShout, a personal finance blog dedicated to educating people on how to manage their finances and save money with credit cards.
Great post – very practical information, for sure.
Great post, but here is some important info to note.After lots of travel and lots of Credit Card research… for an American traveling abroad there is only 1 card company to chose IMHO.
THE ONLY major card company that does not charge a foreign exchange transaction fee is Capital One. That's a savings of 1.8 to 3.2% on every penny you charge. That adds up to a lot, especially if you are travelling abroud LONG term as we are (@transamerics).
Another note, after accumulating nearly 500K miles with American Express Membership Rewards over many years and those miles getting harder and harder to use, as well as getting less valuable every day, I have switched to cash back cards and find them a better deal. For example, my CapOne card earns me 2.25% cash back on everything I charge. Much better than the .5% value you generally earn with miles. On the first 2 years of our Journey while we drive 80,000 miles in the states I was using a AMEX blue cash back, that offered 2% back (w/ $10K a year in charges), but offered double cash back on gas and some other purchases. As you can imaging this saved us a bit off our heafty gas charges.
…Your milage may vary
Very helpful! I joined USAirways cc program about 10 years ago and I'm sooo happy that I did. :)
I have been searching for a website like this in the field I am interested in. I am a big fan. I was thinking about creating my own blog about similar ideas for like-minded people. Some good ideas here. Thanks, I can only hope mine turns out as good as this one
American finance solution
Good article and a nice summation of the problem. My only problem with the analysis is given that much of the population joined the chorus of deregulatory mythology, given vested interest is inclined toward perpetuation of the current system and given a lack of a popular cheerleader for your arguments, I'm not seeing much in the way of change.
Great list of reward options. What would I have got for all my travel expenses… ;-))
Great list of reward options. What would I have got for all my travel expenses… ;-))
There are several different types of travel reward cards on the market so of course you're going to want to identify which ones would best serve your needs. Airline miles, hotels and gas rebate cards comprise the big three and when it comes to travel incentive programs.
The very first thing you want to do is go to a respected credit card comparison website so you can do your homework and properly compare the offers. You will notice that not only do they differ greatly from one issuer to the next, but can also be quite different coming from the same bank or financial institution.
Nowadays, because everything tends to go global, the rewards programs, as the blair rewards, tend as well to offer services around the globe. Why getting a credit card when you can apply for frequent flier programs or hotel discount cards for the major international hotel chains or restaurants. Fly within US and accommodate yourself in the hotels you have subscribed at and gather reward points. I have done so with the AA and got a discount for a flight to London and because I have used the Accor hotels I have managed to get a special hotel room rate while in London. It pays out more to do it the way I've done it than getting a credit card.