There are more types of travel rewards cards on the market than ever, and most come with generous sign-up bonuses that can be hard to pass up.
However, the card with the most lucrative bonus doesn’t necessarily offer the best long-term value. Here are eight tips to make sure you choose the best travel rewards card for you.
1. Keep it simple.
When choosing a travel rewards credit card, your first rule of thumb is to keep it simple.
“For some people, playing the travel rewards cards game is a serious hobby, and they devote a considerable amount of time and energy to it,” says Tim Winship, publisher of FrequentFlier.com. “However, most people don’t have the time for that. For most consumers, the best approach is to keep it simple, and focus on just one or two programs.”
According to Winship, consumers who sign up for numerous travel rewards cards typically end up diffusing miles earnings over multiple cards, which can be hard to redeem.
“Having 10,000 miles here, 7,000 there and 13,000 miles on another card doesn’t do you much good. There is no easy way to consolidate all those miles,” says Winship. “As a result, many people end up leaving money on the table, because they don’t earn enough to redeem rewards for free travel.”
2. Ask yourself: Are you a traveler or a charger?
Travel rewards cards come in two main categories: Frequent flier credit cards and generic travel rewards cards.
Frequent flier credit cards, such as the American Express Delta SkyMiles card or the United Mileage Plus Rewards card, are affiliated with a specific airline. Frequent flier card holders can earn miles through credit card charges and through air travel with the affiliated airline. Miles earnings can only be redeemed on the affiliated airline and its partners, however.
Travel rewards cards, such as the Chase Sapphire or the Capital One Venture card, offer more flexibility for redeeming your rewards because you can book your rewards ticket on the airline of your choice. These cards also give cardholders a greater range of redemption options. For example, rewards earnings can be cashed in for free hotel stays, car rentals, cruises and so on. However, you can only earn miles through charges to your card, not through your travel.
“Both types of cards have advantages,” says Winship. “You can’t say which is going to be best — it depends on your situation.”
If you travel a lot and are able to do most of your travel with one airline, an airline affiliated card will be your best bet. “However, if you earn most of your rewards through purchases and transactions,” Winship says, “you will be better off with a generic travel rewards card like the Chase Sapphire or Capital One Venture cards.”
3. Look for hybrids.
The most valuable credit cards are sometimes generic travel cards where the points can be transferred to airline miles with a large selection of airlines of your choosing.
“Credit cards that allow you to transfer points to the largest number of airlines often give you the best value, and they offer the most flexibility,” says Gary Leff, co-founder of the frequent flier community milepoint.com. These cards are particularly useful for consumers whose goal is to earn miles toward premium travel upgrades, rather than “just” free trips, says Leff.
4. Check rewards earnings per dollar spent.
Typically, rewards cards let you earn one point or one mile for each dollar spent. However, some cards give you extra points for dollars spent on certain types of purchases, such as in supermarkets, gas stations and drugstores.
This can be easy to overlook, particularly if the card comes with a generous sign-up bonus. However, if you earn most of your rewards through credit card charges, you’re better off ignoring cards with flashy bonuses and lower earnings and going with the card that gives you the highest rewards earnings.
5. Watch out for minimum spending requirements.
Many travel rewards cards tie bonus rewards to a minimum spending requirement, which can run as high as $3,000 in the first three months — or higher. Typically, the higher the bonus reward, the greater the spending requirement is.
When comparing card offers, consider whether or not you usually charge this much to your card. No matter how tantalizing the bonus, you don’t want to have to change your spending habits to earn it.
6. Determine the true redemption value of your rewards earnings.
When it comes to travel rewards cards, a point or a mile means many things.
Some cards will award you a free flight with as little as 20,000 points. Others will offer a redemption value higher than one point or one mile per dollar.
Checking out the redemption value can also unearth unexpected benefits of a card (and vice versa). The American Express Blue Sky card, for example, awards one point per dollar spent. However, every 7,500 in points earnings can also be redeemed for a $100 statement credit toward the purchase of any airline ticket, hotel stay or car rental. That turns the effective redemption value into about 1.33 cents per dollar spent — higher than the typical one cent rewards value per dollar spent.
7. Ask: Is the rewards redemption value the same for all rewards?
While most generic travel rewards cards provide more flexibility for redeeming earnings, some offer a lower redemption value when you redeem for certain types of rewards.
For example, the Capital One Venture card lets cardholders earn a full two points per dollar spent. For airline travel redemptions, those rewards earnings can be cashed in for a value of two cents per point. However, redeem rewards earnings for cash-back, and the rewards value goes down to one cent per dollar. To avoid surprises, check the terms and conditions or call the card issuer to ask.
8. Check whether the rewards earnings expire.
Many cards require you to have some type of account activity — either by purchasing a ticket or redeeming miles — at certain intervals, such as every three years, in order to prevent your points from expiring.