TIPS: Travel Rewards Credit Cards
HOW TO CHOOSE THE RIGHT TRAVEL REWARDS CREDIT CARD
If you think doing research for a trip is time-consuming, try doing a little shopping for travel rewards credit cards! There are so many variables that it’s difficult to compare apples-to-apples, and there are even websites devoted to comparing travel credit cards, outlining all their different benefits and features.
TIP: For the best current travel rewards cards available in Canada, check out these sites: www.ratehub.ca and www.rewardscanada.ca
For the best current travel rewards cards available in the United States, check out this site: https://money.com/best-travel-credit-card/
Comparison charts can help by compiling all the information in one place, but there are some important things to understand about your own habits and preferences that can help you select the right travel rewards card for you.
Which Travel Rewards Credit Card is Right for You?
When evaluating which travel reward card is best for you, it helps if you know how much you typically spend on purchases/services every month, not just with other credit cards, but on purchases you may not already be putting on a credit card – like groceries, for example. This can help you calculate how much you could be accumulating in rewards, as the goal will be to consolidate all those household purchases onto your travel rewards card (more on that later).
Are you a spender or a saver? Do you spend points frequently on smaller purchases like a hotel room or do you like to save them up for a ‘big item’ like an entire packaged vacation?
It’s even important to know where and how you like to book your travel purchases: through an agency or travel consultant, or on your own online?
Once you’ve identified your own specific spending habits and preferences, it’s time to think about the individual features you want in a travel rewards card.
Key Features and Benefits to Consider
Most travel rewards credit cards are attached to VISA or Mastercard, both of which are widely accepted in North America and globally. American Express also has several options in the travel rewards category. However, many business and destinations do not accept American Express cards, even in North America, which will limit your ability to use the card to accumulate points on everyday purchases at home. This is an important consideration.
TIP: Try to use your travel rewards credit card everywhere you can, as this will help you accumulate rewards faster. But be careful not to spend more than you can afford to pay off every month, or the exorbitant interest charges will wipe out any benefits!
2. EARNING RATIO:
Most rewards cards offer an earning ratio of around 1% in rewards points. Whether they call them ‘points’ or ‘miles’ you’ll still be getting back in rewards about 1% of what you spend on your card. Some cards do offer higher earning ratios (often with a higher annual fee, or a minimum monthly spend) or they might bump up that earning ratio on certain types of purchases at certain retailers. But if you calculate that 1% is the average return, you’ll get an idea of what you can expect to get back in rewards. (This is where it is good to know how much you spend every month on potential credit card purchases)
3. MINIMUM INCOME THRESHOLD:
Speaking of income, some cards require a minimum annual income in order for you to even qualify for the card. This amount can be based on personal income or household income, something to know before applying, as this might eliminate some cards right from the start.
4. ANNUAL FEE:
Usually the better the rewards, the higher the annual fee (the old ‘you get what you pay for’ applies here as well.) Annual fees on travel rewards cards can run from $0 to $400 annually, something to keep in mind, especially if you need to save up your points for a couple of years before you have enough to redeem. It’s no bargain if you are paying more in fees than you are ever going to redeem in rewards.
5. SUPPLEMENTARY CARD FEES:
The fastest way to accumulate your travel rewards is to have more than one person using the same credit card account. But this can cost you anywhere from $35 to $100 annually for those extra cardholders. Look for options that offer lower-cost or free supplementary cards.
.6. REDEMPTION RESTRICTIONS/TIERS:
Some redemption programs are structured in ‘tiers’ meaning you must redeem a minimum number of points regardless of the value of your actual purchase (i.e. your purchase may only be $250 but you must redeem a minimum ‘tier’ in points that actually represents the equivalent of $350, for example) Look for cards that allow you to redeem without tiers
TIP: Redemption tiers and similar details may only be described in the fine print, so be sure to read this. If it’s still not clear, contact the company to have them clarify any questions you have about how to redeem.
7. PARTIAL REDEMPTION:
Can you redeem only part of the purchase you made using your points? It’s like the opposite of tiers, meaning if you only have $250 worth of points, can you at least put that towards your $500 ticket purchase? Cards that allow you to do this are more flexible, so you can redeem more often.
TIP: If your card doesn’t allow partial redemption, avoid ‘purchasing points’ to make up the difference. The cost of those points is often no bargain.
8. TAXES AND FUEL SURCHARGES
Look for cards that allow you to redeem the entire cost of your travel purchase, including taxes, fuel surcharges, baggage fees, airport renovation fees, etc. not just the flight. Those charges are often more than the cost of the airfare!
9. FLEXIBILITY TO BOOK ON ANY SITE, AND REDEEM AFTER
With today’s get-em-while-they’re-hot travel deals, many of which are offered on online travel sites, you don’t want to have to go through an agency or agent in order to book those deals. Or have to wait to transfer points. Or only use a specific airline. Look for cards that allow you to book anywhere with any travel provider, and then redeem that purchase after the fact using your points. This puts all the control in your hands to jump on those deals when and where you see them.
This is a BIG ONE to consider, as insurance that comes with your travel rewards card can include everything from personal Travel Medical Insurance to Collision Waiver Insurance for Car Rentals. Here’s where it really pays to READ THE FINE PRINT in the Benefits Document before you decide if this is the card for you, or even after you’ve selected your card. Many people forget or don’t realize that they are already covered with their card for many types of insurance, and they end up buying additional insurance for no reason. Now, more than ever, with the recent Covid pandemic, it’s important to know what is included in your coverage and what is not.
NOTE: Make sure you read the benefits document and understand the requirements for being covered with whatever insurance is ‘included’. For example, many cards require your entire purchase to be made on the credit card before the medical/flight/etc is actually covered. Or it may only apply for trips of no more than 21 days, for example.
11. NO BLACKOUT NONSENSE:
This goes without saying for me. If any card restricts when I can book a flight, hotel, or anything else in the calendar year, I’m out. You should be too.
12. ADDITIONAL PERKS/WELCOME BONUSES
Some cards offers other perks, like airport lounge access vouchers, discounted companion tickets, even free checked baggage, especially as sign up bonuses. Many often waive or reduce the fee for the first year. Just remember that after that first year, your annual fee kicks in so you want to make sure you aren’t paying more than you should once you’re into year 2.
TIP: Even though you may have your fave card, always carry a second one with you when you travel, preferably from a different financial institution. Because no matter how many times you warn the credit card company that you will be travelling, the ‘robot police’ that monitor your spending habits might shut you down and block your card. It may only take a phone call to fix the situation, but you don’t want that prize purchase to slip away while you’re connecting to the overseas operator to re-activate your card.