Are Travel Reward Credit Cards Really Worth It?

The range of credit cards offering travel rewards is dizzying. And their annual fees range from zero to several hundred dollars. Here’s what to know when considering buying 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 are starting to see travel resume, thankfully! And with this increase in travel comes predictably an increase in advertisements and offers for travel rewards credit cards.

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

DO YOU SEND TO TRAVEL OFTEN?

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

Sara Ratner, credit cards and travel expert at NerdWallet, tells us, “If you travel frequently, especially if you go abroad once a year or more, credit cards with travel rewards can come in handy. But she notes that there are plenty of options out there, so it’s worth knowing how you want to use those credit card rewards.

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

For example, if you are a die-hard fan of Marriott hotels, you might want to check out their branded card which offers more Marriott-specific rewards.

SEE ANNUAL FEES

One of the reasons 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 with annual fees of up to $695 (or more!). However, the flip side is that many of these high-fee cards also offer great, but complicated, travel rewards.

For example, the Reserve Chase Sapphire The card commands a hefty annual fee of $550, but provides up to $300 in statement credits when you spend that much or more on travel. And Delta Credit cards from American Express reward you with one free checked bag on your flights, but annual fees can range from $99 to $550.

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

In the end, are cards with high fees worth it? Rathner’s view is: “Cards with an annual fee generally offer the most benefits, so it is possible to recoup the cost by using whatever a card provides. They also tend to earn more rewards for your spending.

TRAVEL RESERVATIONS THROUGH YOUR CREDIT CARD COMPANY

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

Rathner advises, “When you use a third-party travel portal, you are subject to their reservation and cancellation policies, not those of the airline or hotel. You may therefore have less flexibility than if you had booked directly. That’s not to say it’s a bad way to book, just read the site’s policies before spending money.

Of course, you can forego the credit card company’s travel booking website for your proven travel booking site. In this case, Rathner tells us that you can find “flexible travel rewards cards at a variety of prices, so you have options if you prefer to book directly with hotels and airlines.”

CASH BACK CARDS

If you’re unsure of the length of your trip, it may be more beneficial for you to opt for a cash back card rather than one that focuses exclusively on travel rewards. Plus, getting extra cash back when you pay higher prices at the pump can help ease the burden of rising fuel costs.

Rathner explains, “Refund cards are more likely to earn extra points at gas stations, but some travel cards do as well. It is possible to earn 2-5% back, depending on the card. As an example, she says, “{L}the Capital One Venture Rewards Card currently earns 2 miles per dollar spent.”

While credit card rewards don’t reduce the price you’ll pay at the pump, it doesn’t hurt to earn rewards or even cash back in the process.

WILL OPENING A NEW CARD AFFECT MY CREDIT?

Whichever card you choose, it’s essential to keep your credit score in mind. Every time you apply for a new card, Rathner says there will be a “rigorous credit check.” She notes that this can temporarily knock a few points off your credit score.

Don’t let that put you off opening a map if that’s what you’d like to do. Just be aware of this, especially if you are considering buying a home or taking out a large loan.

WHAT IF MANAGING A TRAVEL CREDIT CARD IS TOO COMPLICATED?

For those feeling overwhelmed by the rewards and fees of travel credit cards, there’s 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 aren’t disciplined enough to effectively manage multiple cards to maximize rewards, and fees will erode your rewards. Juggling multiple cards can be very time consuming and complicated. Consider using a card that doesn’t charge fees and redirecting the money to a vacation fund.

Rathner agrees this can be a good option, saying, “You can also use a cashback card and apply any redeemed money to your travel budget.”

MAXIMIZE TRAVEL REWARDS WITH CREDIT CARDS

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

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