Last week, I published an article on 10 things you should know before getting your first credit card. That article included a lot of worthwhile tips for first-time credit card users, but one area I didn’t cover thoroughly was travel rewards.
One big reason that many people sign up for credit cards is to generate rewards points that they can then use for travel. Sometimes, these rewards convert into travel benefits at a very nice rate. For example, a card might reward two miles for every dollar spent, and then those miles can be used to book cheaper flights than one can find while paying cash, or a card might be used to get free nights at a hotel chain and can be used in conjunction with a rewards program within that chain to accumulate even more free nights with frequent use.
Here are some strategies to get maximum value out of credit card rewards programs that benefit travel.
First of all, stick to the advice in the initial article.
Here’s the key take-home message from that article: only get a credit card of any type if you are able to pay off the balance in full every month. If the card is causing you to buy things you wouldn’t otherwise buy and to spend more than you’re bringing in, then the card is costing you more than you’ll be able to get in travel rewards and it’s not a net benefit for you.
On the other hand, if you do pay off your card in full every time, not only will it be a nice boost to your credit rating, you also really don’t need to worry about the interest rate on the card and can instead focus on the bonus program.
In short, if you’re ever worried about the interest rate on a credit card, you’re probably using it wrong. You’re either looking at it because you’re carrying a balance, in which case you shouldn’t be using a credit card at all, or you’re looking at it when you’ll never be carrying a balance, in which case the rewards program is more important.
Figure out how you want to travel first.
Why are you traveling? Where do you want to go? What transportation will you use to get there? Where will you stay?
These are the types of questions you should be asking and answering before you even consider using a travel rewards credit card. Different people have very different visions of what they want out of travel.
You might be a person who wants to take one nice vacation a year, in which you fly to a city and stay at one of the nicer hotel chains for a few nights, but rarely travel outside of that. You might be someone who travels a few times a year, mostly by car, and stays at relatively inexpensive hotels. Perhaps you’re storing up rewards to pay for most of a really big trip for your whole family in a few years, like several days at Disney World.
Each of those plans would encourage the use of a different travel rewards card. Obviously, not all trips will be exactly the same, but travel rewards work well for facilitating similar trips.
For example, if you plan on staying at a nicer hotel but less frequently, you may want to look at a card that helps you stay at a Marriott, or perhaps you travel more frequently and are more budget-oriented for the frequent trips and a Best Western is a better option for you.
Similarly, if you plan on flying, you may want to consider whether an airport near you is a hub for a particular airline and then use a card that works well with that airline. For example, if you live in the Chicago area, you’d likely want to lean toward a card that works with American or United, as Chicago-O’Hare serves as a hub for that airline, and Atlanta is a hub for Delta.
The key thing to remember is this: you’re better off when it comes to credit card rewards to pick a few chains related to your travel needs and stick with them. Have a preferred airline, a preferred hotel chain, and a preferred car rental agency. If you’re planning on specific destination travel, you may want to consider a card affiliated with that destination, as it will usually rack up rewards for that destination at a nice rate.
Join customer rewards programs for the businesses you select.
Before we get around to using credit card rewards for travel, it’s a good idea to sign up for the customer rewards programs for the travel-related businesses you prefer. Since you’re already committing to regular use of those businesses anyway, their customer rewards programs will often amplify the value of using them frequently.
For example, some hotel chains will offer a free night of lodging after staying with that chain for several nights, and that can stack with credit card rewards. So, if you earn rewards from your credit card that enables a free night at a hotel in that chain, it will also effectively give you a fraction of an additional night.
It’s a good idea to sign up for these programs first because many such programs will actually link your credit card and your customer rewards account, making everything stack together nicely.
For many cards, “miles” can be used with a variety of airlines and hotels, but there’s a catch.
For example, Capital One travel reward cards have several airline partners and multiple hotel chains that you can use your points with. These transfer directly into the rewards programs for those individual airlines and chains at some exchange rate— for example, 1,000 rewards points might mean 500 points in a particular hotel’s rewards program.
These cards tend to offer a lot of flexibility, but it comes at a cost. The exchange rates for cards that offer lots of airlines and chains tend not to be as good as cards associated with a specific airline or chain, as a general rule.
In other words, you should get a more general travel rewards card if the specifics of your travel change a lot and you’re not often able to use the same airlines or hotels. If you’re able to very consistently use one airline or one hotel chain or are aiming for one specific destination, you should use a card associated with that airline or chain or destination.
For example, if you intend to stay at Marriott hotels often, you should strongly consider a Marriott Bonvoy card, but if you intend to stay at a Best Western frequently, consider a Best Western card. These cards will just put points into your rewards account with those hotels, helping you to easily get free nights. You would then use those specific rewards programs for your hotel bookings.
Similarly, if you know you’re going to usually fly for travel using a specific airline, use a card associated with that airline.
You should choose a card that’s geared toward where most of your spending will be. If you’re going to regularly be buying airline tickets for two or three or four people but all stay in one room, an airline rewards card is better, but if you’re often traveling solo and for longer periods, the hotel rewards will almost always give you more value.
If you travel very infrequently and inexpensively, a travel rewards card probably isn’t worth it.
It can be tempting to get a travel rewards card if you always stay at the same hotel, but the truth is that if you accrue rewards faster than you can use those free hotel nights or airline miles, you shouldn’t use a travel rewards card and should use a cashback rewards card or a card that gives you a discount.
For example, if you travel perhaps once a year and only stay at a hotel for one or two nights, you will probably get more value with a rewards card that offers rewards associated with the retailer you use most frequently rather than a card that offers travel-related rewards. For someone who rarely travels but buys a lot of items on Amazon, for instance, an Amazon Visa will generate a lot more value than a travel rewards card.
Focus on what you actually do or what you have concrete plans to do, rather than what you might do.
A final tip: rather than thinking about what you might do in the future, think only about what you’ve done in the past or what you’ve strongly committed to doing going forward.
For example, if you rarely travel but have a vague notion about traveling more, don’t get a travel rewards card quite yet. Instead, use a different rewards card and see if your travel actually increases in the next year or two.
If you’ve vaguely thought about a Disney vacation, don’t jump on board with a Disney rewards card yet. Instead, use a different rewards card and see if that plan starts to turn into something concrete, and then switch to the card when you start to think about actual dates and plans a year or two in the future.
If you do these things, you’ll get maximum benefits out of travel reward credit cards. Just remember the fundamentals: don’t use a credit card just to get rewards. Instead, use it as a tool to build credit and always avoid carrying a balance; consider the rewards program to merely be an extra perk for good behavior. Not sticking to that plan will cause the costs of the card to quickly exceed the benefits of the rewards.