Making the most of travel rewards cards
As we recently pointed out in Focus on the basics when picking your credit cards, there's no such thing as "the best credit card." One that might be perfect for your individual needs and lifestyle could be wholly inappropriate for somebody else.
Best travel rewards cards?
The editors of ShopSmart magazine, published by Consumer Reports, know that very well. So when they featured airline credit cards in their April 2013 edition they took care not to call their picks the best. In a press release, they differentiated between:
- Mainstream credit cards, which may be good for those who are price conscious, and who aren't especially loyal to certain airlines, perhaps belonging to multiple frequent-flier programs.
- Airline-branded cards, which often better suit those who travel a lot with one or two carriers, and whose principal goal is to get free flights quickly.
They also highlighted another important difference: blackout dates and restrictions tend to be more of an issue with airline credit cards. Those who want the freedom to fly when and where they want might do better with mainstream products.
So with those caveats firmly in mind, we're happy to pass on Consumer Report's picks:
- American Express® Premier Rewards Gold
- Chase Sapphire Preferred®
- Gold Delta SkyMiles® Credit Card from American Express (Editor's note this offer expired and is no longer available)
Sign-up bonuses key
ShopSmart stressed the importance of sign-up bonuses in choosing your personal best travel credit cards. When the article was published, two of those three were offering tens of thousands of bonus points or miles to new customers who met initial spending thresholds, and the generosity of these deals can make a big difference to the attractiveness of products.
However, these bonus offers tend to change frequently, so it's always worth visiting our credit card lists to see the very best current deals when you come to make an application.
Other considerations for travel credit cards
If you substitute "hotel" for "airline" in the above, you may find that the advice holds good for hotel credit cards. But whatever sort of travel plastic you're seeking, there are some other factors you should consider:
- Annual fees. Many travel products come with relatively high annual fees, although these are sometimes waived for the first year. $95 p.a. is common, but some prestigious cards get close to $500.
- Perks. Those annual fees can lose their sting if you value the perks than come with the plastic. Many cards permit your first checked bag to fly for free, and others give you complimentary access to lounges, and rights to cut various lines at airports. You tend to get what you pay for: the higher the fee, the richer the perks.
- Foreign transaction fees. If you travel abroad a lot, foreign transaction fees -- which are often charged at a rate of 3 percent on overseas purchases -- can soon add up. A number of cards have no such fees, and Chase is especially good in this respect.
- EMV compliance. Many countries only issue cards with tiny on-board microprocessor chips, and some travelers report problems using American products in these territories if their plastic has only a magnetic stripe on the back. U.S. credit card companies are currently rolling out chipped cards, and it's not hard to find one if EMV compliance is an issue for you.
- Your credit score. If you apply for every irresistible sign-up bonus in sight, you could end up dinging your credit score. The credit bureaus take a dim view of large numbers of applications for any sort of finance.
Credit card rates another big issue
On average, APRs are higher for travel rewards cards (for all rewards cards, actually) than for non-rewards products. This doesn't matter if you zero your balance every month because you should never pay a cent in interest.
But credit card rates are important if you always or often roll forward balances. Last year, CNN quoted Kentucky-based CPA and author Mackey McNeill on the dangers of charging vacations or flights to plastic. She said: "When you factor in double-digit interest rates and the months -- or years -- it may take you to pay it off, you can end up spending 50 percent or even 100 percent more."
The golden rule when purchasing travel or anything else is to charge to rewards credit cards only those items you can pay off in full at the end of the month. Everything else should go on low interest cards.
Whether you have many or no travel credit cards, we wish you bon voyage!
Published 04/22/13 (Modified 08/11/14)