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Are travel credit cards worth it?
Travel credit cards can offer valuable rewards, but only if the perks outweigh the costs.
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These cards typically have big signup bonuses, competitive reward rates and travel benefits attached. However, most come with expensive annual fees and high APRs, so you’ll want to find one worth its cost.
How do I know if it’s worth getting a travel credit card?
Ask yourself the following two questions to help ensure you’re getting the maximum value from your card:
- Can I earn enough points or miles to justify the annual fee?
- Can I take advantage of my card’s travel features?
Can I earn enough points or miles to justify the annual fee?
The most valuable travel cards have high annual fees, but you can offset these costs with the rewards you earn.
Here’s how to work out how much you’d need to spend each month to earn the rewards to offset a card’s cost.
- Find out how many points or miles you need to get $100 of rewards value. With most cards, 1 point or mile is worth 1 cent. So, you’ll typically need 10,000 points or miles to get $100 of value.
- Divide the credit card’s annual fee by the dollar value of the reward. If the card’s annual fee is $95, you’ll calculate $95/$100 = 0.95.
- Multiply this figure by the number of points needed to redeem $100 worth of dollar value. In our example above, we’d multiply 0.95 by 10,000 to get 9,500.
- Take this figure and divide it by the card’s rewards rate. Let’s say a card offers 2 miles per dollar you spent on every purchase. That means you’d need to spend 9,500/2 = $4,750 to earn enough miles to offset the annual fee.
- Divide this figure by 12. This gives you the target amount to spend on your card each month. Continuing with our example, you’d need to spend $4,750/12 = approximately $396 per month.
If your monthly spending is less than a card’s “break even” amount, the card may not be worth paying for. Consider a no-annual-fee travel card or look into another type of credit card.
Using this formula, let’s look at a few different travel cards to see how much you’d have to spend each month to break even on the annual fee.
|Card||Ongoing annual fee||Rewards rate||Points for $100 of value||Approx. monthly spend to break even|
|PenFed Pathfinder® Rewards Visa Signature® Card||$0||3x points on travel, 4x for PenFed Honors Advantage members; 1.5x points on all other purchases||10,000||$0|
|Chase Sapphire Preferred® Card||$95||5x points on Lyft rides through March 2022; 2x points on travel and dining; 1x points on all other purchases||8,000||$317 on travel and dining|
|The Platinum Card® from American Express||$550||5x points on eligible flights and hotels on up to $500,000 annually, reverting to 1x points after starting January 2021; 1x points on other eligible purchases||10,000||$917 on eligible flights and hotels|
Point values are based on our calculations using provider websites as of March 2021
These calculations only take into account the rewards you might earn. You might also get a significant amount of value from a card’s travel benefits. These features can add enough value that you might not need to spend much to make the annual fee worth paying.
Can I take advantage of my card’s travel features?
You can justify a card’s cost by making sure you use the features or credits offered. Consider The Platinum Card® from American Express as an example.
The card has an annual fee of $550. You get up to $200 in annual Uber credits, up to $200 in airline fee credits on one qualifying airline of your choice and up to $100 credit every four years for your Global Entry or TSA PreCheck application.
If you use your travel and Uber credits each year, it should be relatively easy to offset the price of the card. You might find the card’s other features valuable, too, including complimentary gold elite status, benefits at Fine Hotels & Resorts properties and entry into airport lounges in the Global Lounge Collection.
Who should get a travel credit card?
While earning travel rewards appeals to those with a bit of wanderlust, a travel credit card isn’t for everyone. Consider a travel product if:
- You frequent one airline or hotel chain. Hotel and airline cards can heavily reward you if you’re a loyal customer. Hotel cards in particular usually offer much better rewards than you’d earn with general travel cards.
- You have the patience to get the most value out of your rewards. With travel cards, you won’t know the true value of your points or miles until you redeem them. To get maximum value from them, you’ll need to crunch the numbers yourself or do some research into reward values.
- You have good to excellent credit. Credit card issuers give the best cards those with a history of paying their bills on time and managing debt responsibly. If you don’t have a great credit score, work on improving your credit before you apply for a travel card.
- You pay your balance in full each month. As with any rewards product, paying your balance in full is the best way to get the full benefit of your travel card. This is especially the case if the card has an annual fee. Carrying a balance means accruing interest that can offset your rewards.
What perks will I get with a travel credit card?
With most travel cards, you can generally expect to receive a few of the perks listed below:
- Airport lounge access.
- Fee credit for your Global Entry or TSA PreCheck application.
- Travel credits that cover your expenses for eligible purchases.
- Airline credit cards have perks like priority boarding and complimentary checked baggage.
- Hotel perks like spending credits and room upgrades.
- Hotel or airline loyalty program status upgrades. Many of the top hotel credit cards offer upgrades to silver or gold status.
- Travel coverage: trip cancellation insurance, auto rental collision damage waiver, lost luggage reimbursement and more.
- Travel concierge service.
Get an in-depth look and learn how you can take advantage of these perks while traveling.
How to compare travel credit cards
If you’re in the market for a new travel card, compare the following factors while considering your options.
- Airline or hotel loyalty. If you spend heavily with a certain airline or hotel chain, consider a cobranded card. Otherwise, pick a flexible-rewards card so you can earn rewards regardless of which airline or hotel you spend with. There are even cobranded credit cards for cruise lines if you like to take to the seas.
- Signup bonus. Many travel credit cards have introductory offers of thousands of bonus points or miles. Compare the bonus rewards you might earn, as well as spending requirements.
- Rewards. Compare how many points you’ll earn per $1 spent. Among travel cards, you’ll typically find flat-rate rewards and tiered rewards. If you’re considering a tiered-rewards card, check whether you spend much in the card’s bonus categories. If not, a flat-rate-rewards card might be a better choice.
- Annual fee. Check that a card’s rewards and perks outweigh any annual fee. Some travel cards have $0 or reduced annual fees for the first year, which can help you save. However, make sure you know what the standard annual fee is and when it will apply.
- Foreign transaction fees. Many credit cards charge a fee when you make purchases in currency other than US dollars — typically 3% of the transaction. These fees apply whether you’re traveling overseas or just using an online store based outside the US. To avoid them, look for a credit card with 0% foreign transaction fees.
- APR. To get the full value from your rewards, it’s best to always pay your monthly balance in full. Interest will eat into your rewards, so try to avoid it.
- Travel protection. Many cards offer travel protection, such as car rental insurance and trip cancellation insurance. Though these aren’t the flashiest features, they can be very helpful when you’re planning a trip. Picking a card with the right travel protection can save you hundreds of dollars on your next vacation.
Only apply for a travel credit card if it offers enough rewards and perks to offset its cost, so be sure to look at its annual fee and APR. The lower the APR, the better — though you’ll probably want to pay off your balance each month anyway. Compare some of the best travel credit cards to find the one that best fits how and where you spend.
Keep in mind that a travel credit card isn’t for everyone. If you want a rewards card without dealing with points or miles, consider a cashback card.
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