Are Travel Credit Cards Worth It?

Introduction

Travel credit cards have some of the most appealing perks of all cards, but they also usually come with an annual fee. So it’s natural to wonder, “Are travel credit cards worth it?”

The answer to that question depends on a lot of things, including your travel habits, spending patterns, bill payment strategy, and the card’s benefits. Here’s how to figure out if a travel card is a must-have companion on your next trip.

What Is a Travel Card?

A travel credit card typically offers travel benefits and rewards you for making travel-related purchases with it. You might get rewards for other purchases as well, but these types of credit cards almost always have perks related to travel activities. So, you may get more points or a higher percentage of cash back on specific travel categories, like buying flights, car rentals, hotels, gas or dining.

Rewards come in different flavors, and travel credit cards generally give you one of three types of rewards.

Cash back rewards

Cash back rewards cards usually offer you a percentage of your purchases as a rebate, statement credit, digital payment, or check. You may get a flat percentage back, like 1% or 2% of all purchases. Or you might get higher percentages on targeted categories, like 3% on streaming services and 5% on groceries.

With travel credit cards, your premium cash back categories will typically be travel-related expenses like flights, hotels, car rentals and gas. So if your card offers 5% cash back on flights, and you spend $200 to fly to California, you should receive $10 back as a redeemable reward.

Some cash back rewards will be in the form of automatic statement credits. Other programs may require you to manually redeem your rewards as rebates, or trade them in for perks — like travel discounts or merchandise.

Points

A points program doesn’t offer direct “cash back” benefits, and the structure can be more complicated, but it does give you some flexibility on how to use or redeem your points.

Points are assigned earning parameters and redemption value by the credit card issuer, and there’s no standard one-size-fits-all calculation. But it’s common to see programs where one point is earned on one dollar, and worth one cent to redeem.

So if you earn one point for every dollar spent, the structure could be similar to getting 1% in cash back rewards. Some programs might even let you turn those points into the equivalent of cash back rewards paid out as statement credits. In other cases, those points could be something you trade for gift cards, merchandise, or travel credit.

With travel credit cards, it’s not unusual for travel-related purchases to earn additional points. For example, that could look like 3X points on flights and gas, and 5X points on hotels and car rentals.    

Mileage rewards

This category includes airline miles, and it’s similar in many ways to points. But each of these reward types will come with different parameters, levels, benefits and conditions, depending on the card and the rewards structure.

For example, while airline miles are often tied to a specific airline, generic mileage rewards might work just like points. That includes potentially being redeemable for gift cards, discounts on an array of travel options, or even turned into cash back on request.

Beyond the rewards on purchases, travel credit cards may come with perks like lounge access, travel insurance, and no foreign transaction fees.

Who Benefits Most from Travel Cards?

Before applying for anything new, it’s important to shop around, compare different credit cards, and pick the one that works best for you and your spending habits. Of course, some people will benefit more (or less) from travel credit cards than others.

Travel frequency

Frequent travelers will usually get the most benefit from a travel rewards credit card. Traveling can get expensive, whether it’s a family vacation or a business trip. When you can earn or save money just by using your travel card to make purchases that you would have made anyway, it’s like getting paid to travel — or at least traveling on a discount.

There’s no set level on how much you need to travel to benefit from a travel credit card. But if the card offers more rewards on travel-related expenses, or you can turn your rewards into free travel, you may get more benefit as a monthly traveler than if you only take trips once every few years.

Spending habits

Someone who never travels might not find as much value in a travel card. However, some travel cards also give additional rewards on dining and gas, so almost anyone can benefit if they drive a car, eat out at restaurants, or even order takeout.

And if cash back or points are also offered on every purchase, even if it’s a lower percentage, the card could be a good choice regardless of travel habits.

Redemption options

If a card only lets you use your rewards for booking flights on a specific airline, or putting towards travel vouchers, it’s really only a good fit for travelers. But if you can turn those points or miles into gift cards, merchandise, or cash back rewards, it doesn’t matter if you travel or not — you get to redeem your earnings for what makes sense in your own life.

For example, let’s say you’ve earned 10,000 points or miles, and that’s worth $100 in gift cards or merchandise. You could trade in your rewards for a gift card to your favorite store or use them to select a new pair of earrings from the catalog, and voilà! You’ve benefited without ever setting foot in an airport.

Maximizing Travel Credit Card Benefits

Regardless of what type of credit card you have, you’ll want to make the most of your benefits and rewards. Some tried-and-true methods can make it easier to maximize your travel card perks.

Strategic spending

If you earn a higher rewards payout on specific categories — like gas, dining, or hotel stays — try to use that card to pay for those expenses. So if you could pay for your car’s fill-up with either of two cards, but one gives you additional points on gas purchases, use that card when you pull up to the pump.

If you have the opportunity to stack your rewards, even better. Maybe gas purchases for the month come with 10% bonus cash back rewards, as long as you click a coupon or activate the offer. That would be on top of the card’s standard rewards structure. So if you normally earn 5% cash back rewards on that purchase, and you’re getting a bonus 10%, you’ve just racked up a 15% rebate in total.

Sign-up bonuses

Most sign-up bonuses require you to hit a certain level of spending within a certain amount of time. And when the deadline is looming, it can be tempting to overspend just to make sure you reach the mark. But slow and steady almost always wins this race.

If you wait too long, and suddenly have to make extra purchases, you might also need to keep paying off your balance to make room for them. And each of those payments could take up to a week to post. You don’t want to find yourself panicking when you’re down to the wire.

On the other hand, if you start buying what you normally would when you first receive the card, you’re more likely to reach the finish line with time to spare. If you don’t think you can hit the threshold, the offer probably isn’t a good fit.

Combining cards

If you have more than one rewards card, you can strategize even further to optimize rewards. Maybe one is a travel card, another is geared towards entertainment, and a third focuses on everyday purchases like groceries and utilities.

So then you can reserve the first card for your travel purchases like hotels, flights, gas and car rentals. The second could be your main card for streaming subscriptions. And then you can use the third card to pay for your cable bill and grocery runs.

As long as you’re maximizing each card where it earns the most, and not overspending just for the sake of getting rewards, you’re on your way to being a strategic credit consumer.

Is It Worth Paying an Annual Fee?

All these rewards are great, but you need to consider what it costs to get them. Most travel cards come with an annual fee, so the benefits have to outweigh the costs.

If your card comes with a welcome bonus or balance transfer offer, the rewards could more than pay your annual fee for the first year. If you get extra points for booking certain types of travel, and you regularly use the premium categories, you could easily earn back more than the cost of the annual fee on an ongoing basis as well.

Let’s say you take a two-day trip where you book a flight, a car rental, a hotel for two nights, and eat dinner at restaurants twice. If your card gives higher rewards levels on flights, car rentals, gas, hotels and dining, you’re using the card in an optimal way. That one trip might actually net you enough points to cover your annual fee, even if you keep costs relatively low.

Every card has a different rewards breakdown, so you probably have to do a little bit of math to determine if the fee is worth it to you. In addition, carrying a balance can result in interest charges that wipe out all your rewards and then some. So if you can’t pay off your entire bill each and every month, this type of credit card might not be worth it to you.

Bottom Line

Depending on your travel and spending habits, a travel credit card could definitely be a good choice for you. If it offers points or cash back on all spending categories, it could also be a good choice for anyone.

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