By using a travel reward credit card, many smart travellers are maximizing points and getting a lot of free travel as a result. The benefits of a travel reward credit card are many, from free travel to discounts on hotels and rental cars. But there are some clear disadvantages too, and it is important for the consumer to know what to look for before jumping on board with a travel reward program.
So What Is A Travel Reward Credit Card Anyway?
Simply put, a travel reward credit card is one which issues points for the amount of financing it is used for, and these points can be used as travel credits with various airlines. Many credit card companies offer such point programs, generally redeemable for things like groceries and gas, or consumer products. A travel reward credit card is only redeemable for travel points, so obviously the first thing is to be sure that travel points are what you are hoping to achieve by using the card, otherwise it is better to go with a card that offers rewards more in line with what you would like.
Before enrolling in a travel reward credit card program, it is important to be aware that:
- There is usually a yearly membership fee for the card
- The interest rates are often higher than other cards
- The points are redeemable only with the airline with which the card is affiliated
- There is often a large purchase to points ratio involved with the card.
Many people sign up for a travel reward credit card dreaming of winter escapes or European adventures, only to realise too late that they now they simply have another credit card that is more expensive than the others, and that any points they achieve are negated by the interest rates they have to pay. Some cards give only one point for every two dollars spent, and most travel rewards programs require about 25,000 points for one domestic flight. That means you are spending anywhere from $25,000 to $50,000 to get a flight whose average cost might be $400! If you are carrying a balance month to month, the interest paid out could easily amount to more than the flight is worth.
Getting The Most Out of a Travel Reward Credit Card
To avoid making the most common mistakes and get the most benefit out of your travel reward credit card, follow these four steps:
- Be sure that travel reward points are what you want from the card in the first place.
- Determine which airlines’ travel rewards program most fits your travel plans, then find out if they offer a card.
- Investigate the membership fee, and the purchase to points ratio to make sure it is realistic with the amount you will use the card.
- Most importantly, after you begin using the card: pay off the balance in full every month!
Following these steps, particularly paying off your monthly balance, will ensure that you get the most out of your travel reward credit card and can start saving points for the trip of your dreams today.