Travel credit cards

When are travel rewards cards worth it?
Travel reward cards are worth it for a small percentage of consumers who prioritize travel when making financial decisions. The problem with a pure travel reward card is its single payout. The outcome of using the card will only allow the card holder to receive travel-related products such as flights and hotels. If a consumer does not prioritize travel due to whatever reason, that consumer receives no return on the use of the card.

How much are miles generally worth?
While the value of each mile ranges from just over a penny to as much as 10 or 15 cents, there is a lot of variation in the value when you redeem miles. Most airlines restrict how many seats can be redeemed with rewards miles, have black-out dates, and charge more miles for more desirable dates and destinations. You may need to plan with a long lead time to visit your preferred destination—or pay with more miles and/or fees. It’s not uncommon to book 11 months in advance for a desirable port of call such as Athens, Greece in the summertime if you want to pay with fewer air miles.

When is it worth it to pay an annual fee on a travel card?
Paying an annual fee on a travel card is worth it only if you can reasonably make back the fee through its benefits and rewards or if it provides desirable optionality for redemption. Statement credits, discounts at retailers, and other card benefits can get you back to par. But the most important consideration is whether the card affords you the option to redeem for rewards that you can use.

Before applying, count how many ways you can redeem your miles or points with the airline or the credit card issuer itself. And pay attention to the quantity and quality of travel partners that are a part of the redemption network.

Generally, how early do you have to open a travel credit card if you’re planning on using the welcome bonus to book a vacation?
Because most airlines and hotels allow you book approximately one year in advance of travel, I recommend applying for rewards cards approximately 18-24 months ahead of your vacation. This will give you enough time to receive the card, receive the bonus, and earn additional rewards through daily purchases.

Should I pay off one credit card or reduce the balances on all debt?
Make minimum payments for cards with lower interest rates and pay as much as possible against the card with the highest interest rate until that balance is gone. Then move on to the card with the next highest interest rate. Put new purchases on a card with a zero balance and pay it off every month, or put purchases on the card with the lowest interest rate and pay down high-interest cards faster.

When is a travel rewards card better than a cashback card?

As part of their consideration of various rewards programs, consumers should think about how often they engage in particular activities and the types of products/services they are consuming on a regular basis. For example, someone who travels frequently may be able to earn more from a travel rewards card than a card that offers cash back on all purchases, even if the travel rewards card does not offer a higher percentage than the cashback card each time it is used.

However, even a frequent traveler should think about factors such as transportation to and from their destination as well as during their stay, accommodations, and other related expenses that are directly related to travel, in addition to how many people they tend to travel with. If many of the typical service providers, vendors, and retailers are not covered by the travel rewards card, a cashback card may make more sense. Regardless of the options they are choosing among, consumers should be sure to read all details related to benefits, criteria, and rules—including any fine print—before making a final decision.

Do credit card rewards encourage consumers to spend more than they would otherwise?
Research confirms that credit cards encourage greater spending than if cash were used The average households with credit cards has $8,398 of credit card debt. Often times this is out of necessity due to illness or emergencies. But more often it allows individuals to concede rational choice to satisfy the need for instant gratification. Our economy has $50 trillion of credit versus $3 trillion of cash, so it is partly a function of our system. It encourages credit card usage. But the choices are still ours to make.