Have you always wanted to try playing the travel rewards game so you can rack up miles and score a cheap vacation?
If you're responsible with credit, pay your bills on time and don't carry a balance, a travel rewards card could help you achieve your travel goals. But, it can be very complicated to choose — and use — this type of card. So rewards card newbies should follow these steps.
1. Decide if a travel rewards card is right for you.
If you don't travel a lot, a travel rewards card might not be your best choice, says Linda Sherry, director of national priorities for the nonprofit advocacy group Consumer Action. That's because many of the cards carry an annual fee, and it's usually easier to rack up miles if you fly a lot and spend a significant amount on travel. If you're more of an armchair traveler who hopes to take a nice vacation, you might be better off using a non-rewards card for regular purchases and saving up for a trip.
“Even the $100 you might pay as an annual fee on one of these cards could be the start of your travel savings,” Sherry says.
2. If you do decide to get a travel rewards card, choose carefully.
Which card will work best for you depends on your travel habits and goals. In general, travel rewards cards can be divided into three types, each with its own pros and cons.
Airline-specific cards – Airline-specific cards co-branded with airlines typically work best for customers who are loyal to a specific airline and want the perks associated with the card. As a cardholder, you might get a free checked bag on each flight, priority boarding and discounts on food and drinks purchased on a flight, Sherry says. You would sign up for that airline's frequent flier program, and your miles typically get posted right to your frequent flier account.
Cards with fixed-value miles or points – Fixed-value cards, such as the Capital One Venture Rewards Credit Card, work well if your goal is to earn an inexpensive domestic airline ticket, says Gary Leff, co-founder of frequent flier community Milepoint.com. Fixed-value cards give you a certain number of miles (or points) for each dollar spent on the card, and each mile is worth a certain amount — usually about a cent. For newbies, these cards can be attractive because they are straightforward, easy to use and let you book flights on a variety of airlines on any day you want. It's easy to figure out how much your miles are worth: In most cases, just move the decimal point two places to the left. So, 100,000 miles generally equals $1,000.
But there's a downside if you want to travel the world in style: you'd need a huge number of these miles — half a million or more — to get an international business-class flight, Leff says. The points on these fixed-value cards can also be redeemed for rental cars and hotel stays, too.
Cards that offer transferable miles or points – If you want to jet around the globe in business class, a card that allows you to transfer your points to a variety of frequent flier programs is the way to go, Leff says. For example, if you have certain Chase credit cards, such as the Chase Sapphire Preferred, you can sign up for the Chase Ultimate Rewards program, which lets you transfer your accrued points into participating travel programs. If you have an eligible American Express card, you can join the American Express Membership Rewards program, which also allows you to transfer points. Having the option to transfer points to various frequent flier or hotel frequent guest programs gives you flexibility.
“There are opportunities to redeem your points for any kind of travel — you're not stuck with one airline,” says Rand Shoaf, founder of travel rewards website The Well Traveled Mile. But the biggest benefit is that, by transferring the miles into frequent flier programs, you can get high-value tickets for far fewer miles than you'd need with a card that has fixed-value miles, Leff says.
Other things to consider are whether a card has an annual fee, what other perks it offers and if there's a sign-up bonus. In some cases, you can get 50,000 miles for opening a card, so it can really pay off.
“There are some wonderful bonuses,” Leff says. “They can be really lucrative.”
You should also think about where you plan to fly. If you sign up for an airline-specific card, that airline might allow you to use your miles to book flights with its international partners. Check to see if those partners fly where you want to go, Shoaf recommends. If you're earning transferable miles, you have more options — but it's still helpful to know that American is the airline to focus on, for example, if you want to go to South America, Leff says.
“It really helps to have a plan,” Shoaf says.
3. Learn how your card works.
Read the terms and conditions before you sign up for any card. Afterward, continue to familiarize yourself with the ins and outs of how your card works.
“It's not very fun to read the small fine print, but it is important to know what you're getting,” Shoaf says.
When you're ready to expand your knowledge of airline rewards cards and frequent flier programs, you can follow blogs and forums devoted to rewards travel: Shoaf recommends Flyertalk.com and Milepoint.com.
4. Sign up for airline frequent flier programs.
Signing up for airline frequent flier programs allows you to combine miles you've earned by flying and miles you've earned by spending — if you use an airline-specific card or a card that lets you transfer your miles to a frequent flier account, Shoaf says. If you have an airline-specific card, you'll probably need to sign up for that airline's frequent flier program anyway, so your miles can be deposited into that account. And if you have a card that allows you to transfer miles or points, you'll want to sign up for several frequent flier programs so you can move miles into your accounts as needed for a particular trip. Start with a handful of programs with airlines that fly — or have international partners that fly — where you want to go, Shoaf says.
5. Keep track of your miles.
If you have multiple cards or rewards programs, it can get confusing to keep track of your earnings. Experts recommend using an app or free service, such as AwardWallet.com, to organize your miles and make sure you use them before they expire.
6. Redeem your miles.
How you redeem your miles will depend on the card you have, whether it's tied to a frequent flier program and what trip you want to take. If you have a fixed-value card, you probably will go to that card's website to redeem your miles and book a flight. For example, Capital One's Venture card has a site powered by Travelocity. If you have a card that's tied to an airline frequent flier program, once your miles are in your account, you can book your flight on the airline's website. If you're trying to book on a partner airline, you might need to call customer service to get help, Shoaf says.
The best thing for newbies to remember is to start small and not stress out about airline miles, Shoaf says.
“Have fun and don't obsess with earning miles and points,” he says.