Are Credit Cards with Travel Rewards Really Worth Having?

The array of credit cards offering travel rewards is dizzying. And their annual fees run the gamut from zero to several hundred dollars. Here’s what to know when considering a travel rewards credit card.

Over the past two years, travel has constantly changed. After keeping travel plans on the back burner for so long, we’re starting to see travel pick up again — thankfully! And along with that uptick in travel predictably comes a rise in ads and offers for travel rewards credit cards.

Maybe you decided to cancel your travel cards in 2020 as COVID-19 began to upend the world, or maybe you’re new to these cards altogether. Either way, it’s a good time to review whether it’s time to renew your travel rewards credit card or apply for a new one. But first, you’ll want to consider whether the travel rewards offered are worth it — and whether the card you choose could also help pay for those skyrocketing gas prices.

ARE YOU PLANNING TO TRAVEL OFTEN?

If you’re considering a credit card with rewards for travel, the first thing to ask yourself is whether you plan to travel often.

Sara Rathner, credit cards and travel expert at NerdWallet, tells us, “If you travel frequently, especially if you go overseas once a year or more, travel rewards credit cards can come in handy.” But she notes that many options exist, so it pays to know how you’d like to put those credit card rewards to use.

She also points out, “If you’re loyal to a specific airline or hotel brand, a co-branded card will grant you perks like free checked bags or room upgrades.”

As an example, if you’re a die-hard fan of Marriott hotels, then you may want to look at their branded card that offers more Marriott-specific rewards.

LOOK AT ANNUAL FEES

One reason it’s so important to know how you plan to use the card and its rewards? The potential for high annual fees. Some cards offer low or no annual fees, but there are cards out there with annual fees as high as $ 695 (or more!). However, the flip side is that many of those high-fee cards also offer some excellent — but complicated — travel rewards.

For instance, the Chase Sapphire Reserve card commands a steep $ 550 annual fee, but provides up to $ 300 in statement credits when you spend that much or more on travel. And Delta’s credit cards through American Express reward you with a free checked bag on your flights, but the annual fee could be anywhere from $ 99 to $ 550.

We asked Rathner how likely it is that the average person will recover their annual credit card fee via the rewards offered by the card company. She tells us, “That depends on how often you travel and how many of the card’s benefits are actually relevant to you. If you’re going to use all the travel credits, visit airport lounges and check bags, you’re much more likely to get decent value out of a card even after paying the fee. ”

When it comes down to it, are the cards with steep fees worth it? Rathner’s take is, “Cards with annual fees typically offer the most benefits, so it’s possible to earn back the cost by using everything a card provides. They also tend to earn more rewards for your spending. ”

TRAVEL BOOKINGS THROUGH YOUR CREDIT CARD COMPANY

Many travel credit cards offer additional rewards if you book your travel through their online portals. However, it’s important to take note of the credit card company’s cancellation policies.

Rathner advises, “When using a third-party travel portal, you’re subject to their booking and cancellation policies – not the airline’s or hotel’s. So you may have less flexibility than if you had booked directly. That does not mean this is a bad way to book, you just need to read the site’s policies before you spend any money. ”

Of course, you could forego the credit card company’s travel booking website for your tried-and-true travel booking site. In that case, Rathner tells us you can find “flexible travel rewards cards at a variety of price points, so you have options if you’d rather book directly with hotels and airlines.”

CASH BACK CARDS

If you’re not quite sure how much you’ll travel, it may be more beneficial for you to look at a cash-back card versus one that’s focused exclusively on travel rewards. Plus, getting some extra cash back as you pay higher prices at the pump can help ease the burden of rising fuel costs.

Rathner explains, “Cash-back cards are more likely to earn extra points at gas stations, but some travel cards do as well. It’s possible to earn 2-5% back, depending on the card. ” As an example, she says, “{T} he Capital One Venture Rewards card currently earns 2 miles per $ 1 spent.”

While credit card rewards will not bring down the price you’ll pay at the pump, it does not hurt to get some rewards or even cash back in the process.

WANT TO OPEN A NEW CARD HURT MY CREDIT?

No matter what card you go with, it’s critical to keep your credit score in mind. Any time you apply for a new card, Rathner says there will be a “hard credit check” done. She notes that this can knock a few points off of your credit score temporarily.

Do not let that discourage you from opening a card if that’s what you’d like to do. Simply be aware of it, especially if you have plans to buy a house or take out a large loan.

WHAT IF MANAGING A TRAVEL CREDIT CARD IS TOO COMPLICATED?

For those feeling overwhelmed with the rewards and fees of travel credit cards, there is a simple solution.

Rochelle Odesser, CFP, Madison Planning, West Harrison, NY, advises, “Spend your time planning your vacation, not managing card programs. Your time is valuable. ”

She continues, “Most of us are not disciplined enough to effectively manage multiple cards to maximize rewards, plus fees will erode your rewards. Juggling several cards can be very time consuming and complicated. Consider using one card that does not charge a fee and direct the cash back to a vacation fund. ”

Rathner agrees that this can be a good option, stating, “You can also use a cash-back card and allocate any redeemed cash toward your travel budget.”

MAXIMIZING TRAVEL REWARDS WITH CREDIT CARDS

Those who plan to travel more frequently can reap some big rewards from credit cards. If you feel the travel rewards offered by a credit card will be enough to offset its annual fee, then it makes sense to open a card. But if you’re just looking for some cash back as you occasionally travel (or shell out extra cash at the pump), there are simpler options in the form of cash-back cards. Travel rewards credit cards can definitely be worthwhile, if you do your research and make sure the rewards align with your travel needs.

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