If you haven’t noticed, travel credit cards have become the avocado toast of the finance world. Everyone wants to put travel cards on everything. It’s only natural that you’ve found yourself asking what the hype is all about. You may have found yourself wondering what you have to do to apply for a travel credit card, or if a travel card is going to be too fancy for your taste buds. Well fellow saver, you’ve come to the right place. Let us help expand your financial palate.
The Origin Story
American Express paved the way for the travel card market with the introduction of the Platinum card in 1984. While a charge card rather than a credit card, the Platinum card offered top tier travel benefits to its members. Long viewed as a status symbol of the elite, other credit card companies started to take notice and introduce competing products with top tier benefits of their own. Much to the consumers benefit, these additional flavors came in both the charge and credit card variety.
At its core, the travel credit card is a card that offers points earning potential on your everyday purchases. Those points can then be redeemed for travel expenses such as flights, hotel rooms, or gift cards for restaurants as you make your way across the world. Points aside, travel cards are often supplemented with unique benefits like travel insurance, primary rental car insurance, waived TSA precheck fees, incidental airline fee credits, free checked bags on your favorite airline, or status at your favorite hotel. When used properly, travel cards can help make your trips cheaper and more extravagant at the same time.
How do I Know What Card is the Right Card?
The great thing about travel cards is their wide array of offerings. Each product is truly different. This makes finding the right card for you a bit of research, but it also means that there is a card out there for you. We recommend planning your dream vacation on paper and then deciding what card is right for you.
Let’s say I need a break from TPJ and I want to take my family to the Bahamas. A quick search tells me that my flight is likely going to be on United Airlines. I want to focus on a point currency that is going to allow me to book a flight on United. A round-trip flight to the Caribbean is 35,000 points, so I’ll need 70,000 to fly there with my husband. I see that there is an airline card offering 50,000 points for new customers. It also offers free checked bags. After putting my household expenses on this card for a year, I’m going to be able to fly to my beach destination for about $25 in taxes. Cheers!
I’m a Visual Learner - Show Me an Example
You got it dude, but it’s a word problem so put your math hat on. Let’s say you’ve decided to sign-up for a card that earns 3x points on restaurants and 1 point per dollar on everything else. The card came with a 50,000 point sign-up bonus, but to get that, you had to spend $3,000 on the card in the first 3 months. You typically spend 1,250 each month on your card. $250 of that is on Avocado Toast. Here’s what your points look like in year one:
$250 x 3 = 750
$1,000 x 1 = 1,000
Alright. So you have 71,000 points. What that means will depend on the point currency.
Example A: Chase UItimate Rewards Points - If these cards were earned on an Ultimate Rewards card, you may be able to redeem them for 1.25 cents each on travel. That gives you a value of $887.50 on travel of your choice with no blackout dates.
Example B: If you earned Citi ThankYou points, you have the option to redeem points for 1.3 cents each in value for flights on American Airlines. That will give you $944.30 in flight value.
Example C: Let’s say you earned these points directly with United Airlines. United Airlines offers economy awards from the U.S. to the Caribbean for 35,000 points. This will give you enough points to fly round trip to the Bahamas to snag some conch toast with a Carib beer and then enough points left to fly back to the Bahamas after you realize that life before conch toast wasn’t really living. While finding the sweet spot for flights is a bit trickier than option A or B, three Caribbean flights could easily be valued at over $1,500.
You Had Me at Conch Toast. How do I Sign Up?
Whoa. Hold your horses. Travel rewards credit cards aren’t for everyone. Sure they can save you money on aspirational travel, but to help offset the costs of handing out award miles, banks often charge higher interest rates (or APRs) on the cards. The average interest rate on a rewards card is 15.46%, while a low interest card without rewards averages around 10.37%. We always recommend you pay off your balances in full each month. Not doing so would negate any rewards earnings. Travel cards also tend to come with annual fees, so it’s important to determine if you’ll be traveling enough to justify that additional expense. If you’re not in a position to pay off your balances in full each month check out a card with a 0% intro APR period. Travel cards also generally require that you have excellent credit. Not sure what your credit score is? Experian has a pretty good explanation of what goes into a credit score. Capital One also allows non-cardholders to check their score with their Credit Wise tool
Still Ready to Start Your Journey?
You can start comparing travel cards here. If you’re looking for some general guidance here are three cards we’d recommend.
Three Travel Cards for Beginners
First timers. It’s no hassle rewards redemptions and a lower annual fee makes it easy to test the waters with rewards cards.
Those looking to build up a bank of loyalty points and earn status, Hilton is our card of choice. With hotels in just about every metropolitan area, you’ll never find yourself in a bind.
Those that are willing to go the extra mile to find travel partners to maximize their redemptions.