Last updated on August 14th, 2020
Travel cards are consistently among the most popular types of credit cards, and for good reason: In addition to their purchasing power, they offer a multitude of perks. Plus, consumers are as eager to travel now as they’ve ever been, and with so many opportunities to spend – be it booking travel, purchasing experiences, or buying souvenirs – credit cards are a convenient commodity. If you’ve yet to navigate the sea of travel cards, you should first familiarize yourself with them. Read on to learn the core components of travel credit cards, what they mean, and what to look for when comparing them.
Travel Credit Cards at a Glance
As you might expect, travel credit cards are aimed primarily at individuals who spend ample time on planes, in hotel rooms, and generally out of town – whether on business or vacation. There are general travel credit cards, which are great all-around options that will give you some form of benefit with hotels, airlines, rental companies, and booking agencies; and there are also co-branded travel cards such as hotel and airline credit cards. These are partnered with individual hotel brands or airline companies and their perks are more specific to the associated carrier or lodging company. Co-branded cards will give you better value if you’re a loyal customer of a particular brand but are less practical if you like to keep your options varied or prefer to look for the best possible deal among the competition.
Travel cards will usually require applicants to have at least a good credit standing, with a credit score of around 700 being a safe starting point. Issuers offer plenty with a travel card, therefore they’ll be wanting customers who are financially responsible for handling all the goodies that their plastic includes. As with other types of credit cards, travel cards can have different “tiers”, with the most prestigious being offered to a select few. You should try to have good credit regardless of which type of card you’re in the market for, but it’s especially preferred if you’re looking for a good travel card.
Since all the add-ons in travel cards lean in the customer’s favor, issuers need a counterbalance to make up for all the value they make available. That’s where annual fees come in. Many credit cards have annual fees, but they are especially commonplace in travel cards. Depending on the exclusivity of the card, annual fees can range from double digits to over $500 – just for being a cardmember.
It’s not all doom and gloom, however, as in many cases, the annual fee is offset after taking advantage of just one or two of a travel card’s benefits. For instance, a card might impose a $95 annual fee but also offer a $100 statement credit for any travel incidentals you purchase in a given year (baggage check costs, room service, etc.). Maxing out that $100 statement credit makes up for the $95 you’d have to shell out for being a cardmember. Plus, several travel cards waive the annual fee for the first year, further incentivizing you to apply and spring for all the perks.
What to Look for in a Travel Credit Card
The majority of travel cards feature a similar set of cardmember bonuses and perks. Below are the most common to look out for when considering a travel credit card.
Rewards Programs: They do not just travel credit cards, they’re travel rewards credit cards. Arguably the main reason customers own one, rewards programs can make it easy to accumulate points or miles that can later be redeemed in multiple categories. The points structure will typically be set up to earn you at least 1 point per $1 spent on most purchases and double or triple that amount per $1 on specific categories such as dining out at restaurants, purchasing flight reservations, or booking hotel stays – purchases that travel enthusiasts tend to make more frequently than the rest of consumers.
Rewards Redemption: Travel cards will normally give you multiple options when you want to redeem your accumulated points. Free travel – in the form of booking flights, hotel stays, rentals, and vacation packages – is one of the most popular choices, as are statement credits. You can also redeem your points for gift cards, and if the card issuer is partnered with other loyalty programs – such as an airline or hotel loyalty program – you may be able to transfer miles or points to an existing account where you might already be accumulating some.
Sign-Up Bonus: The flashiest selling point of travel cards is the sign-up bonus. Almost all travel cards have one, and it’s the “carrot” with which issuers draw consumers to apply. A sign-up bonus will typically be a huge amount of rewards points or miles that is awarded to you after reaching a spending threshold within the first few months after opening an account. An ordinary sign-up bonus offer for a travel card might go something like this: “Earn 50,000 bonus rewards points when you spend $3,000 in purchases within the first three months from account opening.” $3,000 might be a hefty price to pay for all those bonus points, but if you plan to use your card frequently, or will be making a big-ticket purchase – like a getaway – soon after you open an account, then those are expenses that were going to happen anyway. It’s important that you don’t go out of your way and find things to spend money on just so you can hit the goal that will net you the sign-up bonus, otherwise you’ll be finding yourself deep in debt that you may not be able to easily repay.
Travel Credits: You’re more likely to see travel credit perks in the above-average tiers of travel cards. These may come as reimbursements when you have expenses such as checking luggage, purchasing an in-flight meal, paying for transportation, or ordering room service. Another type of travel credit is reimbursement for enrolling in expedited airport security programs like Global Entry.
Travel and Purchase Coverage: Expect the unexpected, as the saying goes. Frequent travelers will surely be familiar with the woes of late or canceled flights, lost luggage, or rental car accidents. A travel card will cover most of these unwanted occurrences, providing the customer with insurance up to a set amount for when disaster strikes. Though not the most glamorous of perks, they allow you to enjoy your journey with peace of mind.
Exclusive Hotel/Lounge Access: Depending on the card, you may have exclusive access to a portfolio of hotels where you can enjoy special rates or other amenities. In addition, certain cards grant entry into swanky airport lounges where you can relax and enjoy a drink or get some tasks done with complimentary workstations and Internet access.
Pros and Cons of Travel Credit Cards
If you use them wisely, travel credit cards can be one of your best friends. The more frequently you use one, the more juice you get out of it, especially thanks to the ability to earn rewards points. Earning additional points on the categories that travelers spend more money in – dining and travel-related expenses – makes sense, and the ability to earn at least one point per dollar on most other purchases is a great incentive to keep a travel card handy as a daily form of payment. These cards are also very flexible with the options you have when you want to redeem your points, and they’re accessible in that they’re accepted worldwide and in most cases, you won’t be charged for using them abroad.
There are drawbacks, however. If you’re just a casual spender, then you’ll be working for a travel card rather than making it work for you. Since most benefits are maximized when traveling – and the expenses that come with it – you simply won’t get a good value if you only use your card for a weekend trip or the one time of the year when you get on a plane. What’s more, since travel credit cards tend to have above-average interest rates, you’ll be paying more in the long run if you’re not careful with your spending.
Ultimately, a travel rewards card caters to a particular lifestyle, and those who live it will benefit most from one. It’s easy to get wooed by all the introductory offers that card issuers dangle at you, but if you don’t have the financial footing to afford a travel card, or if you simply don’t spend much time jet setting, you’ll be better off with a credit card that’s less demanding. It’s always a wise move to evaluate where you stand before applying for a credit card, even if you’re the perfect fit for it. When you know you can get all the value out of your next credit card, especially a travel card, you’ll be in for smooth sailing ahead. Bon voyage!