If you’re trying to save money on travel in the next year, chances are good that getting a travel rewards card is on your mind. When used with enough frequency and foresight, these cards can be used to save hundreds of dollars on airfare, hotels and ground transportation. But getting a travel rewards card isn’t always the right idea, and when it is, there are so many to choose from. Here’s a basic guide to determining when to get a travel rewards card and which ones to consider.
Qualifying for a Card
Most travel rewards cards require a good or excellent credit score for you to qualify. If your score is slightly above average or less (anything below 700), then you should consider getting another card and building your credit history before applying for a travel rewards card. If you’re not sure whether your application will be rejected, it’s wise to wait it out and stay the course—a rejected application can negatively affect your credit score.
Perhaps the most enticing perk of each travel rewards card is its sign-up bonus. If you spend X amount of money (usually between $500 and $4,000) over the course of your first 90 days with the card, you’ll be rewarded with Y number of travel points (usually worth between $150 and $500). The sign-up bonus is built to get you into the habit of using your new card regularly and liberally, and for that exact reason, it can easily backfire. Many cardholders, in the hopes of earning the sign-up bonus, overspend and end up offsetting their rewards in interest and late fees. Before getting a card, make sure you can comfortably reach the sign-up bonus threshold without overextending your funds.
If you tend to only spend $500 a month on your credit card, you should hold back from getting cards with high thresholds for the sign-up bonus, like the Chase Sapphire Preferred. Instead, think about getting cards with lower spending requirements, like the Capital One VentureOne card. Prudence is important since travel rewards cards tend to come with high interest rates and hefty late fees. There’s no point in risking your financial well-being for a few hundred dollars in rewards.
The travel rewards cards with the strongest benefits tend to have an annual fee attached, generally ranging between $95-550. These cards are great for the well-seasoned traveler but probably aren’t worthwhile for anyone who travels only once or twice a year. If you don’t intend to spend more than $1,000 a month on your card, then a card with an annual fee is probably not worth acquiring.
Co-Branded Travel Rewards Cards
If an airline or hotel chain that you’re particularly loyal to has a co-branded card, you should look into getting it. Each co-branded card gives you extra points for spending at the sponsored business and comes with perks such as free checked bags, or a night stay that’s awarded on the anniversary of the account’s opening. Though these cards are restrictive in that their rewards can only be redeemed at one business, their benefits often outweigh those on general rewards cards.
Used wisely, travel rewards cards can go a long way towards making your next trip affordable. If you do sign up with the expectation of cashing in on those rewards by a specific date, remember that travel points sometimes take as long as 8 weeks after the end of a pay period to show up in your account. When considering a travel rewards card, try to think like a pilot—keep in mind where you’re going and how much gas you have in the tank, and plan accordingly.