Clark Howard of Money Expert magazine favors travel-focused credit cards in his wallet; however, most consumers would be better served with cash back cards due to rewards being more worthwhile on general cards than travel ones.
Travel credit cards provide reward points or miles with purchases, which can then be redeemed for free flights and hotel nights depending on their redemption method and card issuer. However, their value varies based on these factors.
1. Points vs. Cash
Value of credit card points and miles depends heavily on how they’re redeemed, and can become increasingly worthless over time if card issuers raise thresholds to get large redemptions such as free flights or hotel stays.
Cash back cards tend to be less costly and offer more diverse rewards, which make them attractive options for many people. Furthermore, these cards may save money on interest charges as well – making them even more desirable to certain individuals.
If you’re new to earning rewards, a cash back card might be the way to go. It’s simple and won’t require managing multiple cards or traveling portals or transferring points between partner programs – plus many offer large sign-up bonuses! Once earned, use it either cover credit card spending or put it towards savings.
2. Redeeming Points For Cash
Redeeming rewards for cash back can be an effortless experience. Cards that provide this option typically value each point at one cent and give you the choice between receiving your reward as either statement credit or direct deposit into your bank account.
Card issuers define what constitutes cash back differently, but generally speaking rewards can be redeemed for statement credits, gift cards or merchandise. Some travel cards also allow you to redeem them against specific airline purchases or additional travel perks like free flights and seat upgrades.
Travel rewards cards are ideal for frequent travelers looking to maximize their reward earning potential. Many feature high rates on everyday spending and multiple airlines and hotel transfer partners to help reach travel goals more effectively.
3. Redeeming Points For Flights
If your plan is to redeem rewards for airfare, consider finding a card that partners with multiple airline loyalty programs and allows for 1:1 point transfer with its partners, while offering non-reward benefits such as travel insurance, purchase protection or statement credits.
Co-branded travel credit cards may offer signup bonuses that exceed their annual fee for new card members who make certain purchases within a set timeframe after opening an account. Such bonuses could even exceed this sum!
Fetters says the choice depends entirely on your lifestyle and plans for using the card. Individuals seeking flexibility in redeeming their rewards earnings may prefer cash back cards over rewards cards.
4. Redeeming Points For Hotels
Redeeming credit card points for travel bookings can provide maximum value from credit card points; but to do so effectively requires understanding the rewards programs of each card and using multiple cards together for maximum earning potential.
Co-branded hotel credit cards allow you to earn rewards that can be redeemed at specific hotels within a chain portfolio, while general travel rewards cards provide greater flexibility for stays at various properties. Both types of rewards cards provide excellent value when award pricing increases during peak travel periods; fixed-value points offer additional simplicity if this approach appeals to you.
5. Redeeming Points For Other Rewards
There are plenty of techniques online for optimizing credit card points and miles, yet navigating airline and hotel loyalty programs, managing multiple cards simultaneously and moving points between accounts can be complex and time consuming.
Even the best travel rewards cards typically charge an annual fee; though some offer low or no annual fees in their first year and offer generous sign-up bonuses. For an easier, more straightforward redemption option, a cash back card may be better; these offer statement credits, direct deposits or paper checks that you can redeem as statement credits, direct deposits or paper checks – redeeming earnings may even allow you to pay down debt, purchase merchandise and gift cards or use towards travel bookings made through your card provider’s travel portal; which are often the most valuable.
