Disclaimer: This post contains references to products from one or more of our advertisers. We may receive compensation (at no cost to you) when you click on links to those products. Read our Disclaimer Policy for more information.
If you are like me, then you want to travel and enjoy the world. Whether they crave new cuisine, beautiful scenery, or authentic cultural experiences, traveling is a fantastic way to decompress, forge meaningful connections, and step out of their comfort zone.
However, both novice and avid travelers continually try to find ways to save money on airfare, hotels, and experiences while indulging in their adventure.
So, what is the secret to optimizing your travel while staying within your budget?
Travel credit cards!
Travel credit cards are a large family of rewards credit cards specializing in helping consumers earn points and miles for their next trip.
They come with loads of benefits and features, including free hotel stays, complimentary flight upgrades, and even VIP lounge access at airports.
Today, we will discuss numerous benefits of travel credit cards and some strategies for choosing the optimal credit card for you and your needs.
What Is a Travel Credit Card?
At the core, a travel credit card is a credit card offered by a bank or other financial institution designed to help the cardholder elevate their travel experiences by leveraging their current spending habits.
Along with direct travel benefits such as discounted flights and hotel stays, card issuers often include extra travel benefits as part of their offering.
While a wide range of benefits can be included with a travel credit card, common options include some form of travel or trip-delay insurance or direct credits for airlines or hotel incidental fees.
How Do Travel Credit Cards Work?
Each travel credit card has its own unique, stated benefits that help the cardholder maximize its benefits.
For example, imagine you have a general travel credit card that earns 3x travel points per dollar spent on groceries and restaurants and 1x travel points per dollar spent on all other purchases. This would be a great option for someone who generally allocates their budget towards dining and groceries.
If they spend a combined average of $800 per month on food and groceries, then they will end up with 2,400 points per month or 28,800 points per year.
Different travel rewards programs rate their points between half a penny up to $0.02 depending on redemption options.
But for this example, each point is worth ~ $0.01 when redeemed for travel which is $288 worth of free travel for simply spending this traveler’s normal monthly budget.
$288 can save money on a trip and easily cover a flight or night at a hotel.
Now that we have a general idea of how travel credit cards work, let’s dive into some of the specifics.
Types of Travel Credit Cards
Travel credit cards represent a large segment of the rewards credit card market, and as a result, there are many options to choose from to match your lifestyle and spending habits.
Some of the most common travel credit cards offer a general rewards approach without tying directly to a single brand, while others are co-branded with hotel groups and airlines.
Traditional Travel Cards
Traditional travel cards generate flexible rewards points that can be utilized in many different travel scenarios.
Similar to our example above, cardholders earn points or miles that can be used to book travel directly through their banks’ portal, or they can transfer the points to a partner airline or hotel group.
Thanks to the flexibility offered by these cards, they are often ranked near the top of many polls and best credit card lists.
Other benefits of traditional rewards cards are extended benefits that are easy to redeem, such as travel and restaurant credits.
A handful of traditional travel cards offered by American Express and Chase, among others, offer flat travel credits that can be used for flights or hotel stays.
If you aren’t tied to one hotel chain or airline and are comfortable using carriers that offer the best deal for your budget, cards with these travel credits may be a great option.
Potential downsides of traditional travel cards generally relate to rewards statuses with airlines and hotel chains.
Since they offer a great deal of flexibility, they don’t include as many loyalty incentives as their co-branded counterparts.
Co-branded travel credit cards have enhanced benefits for cardholders because they are directly associated with a specific brand, such as an airline or hotel chain.
These co-branded cards offer unique benefits to cardholders, including complimentary hotel stays, accelerated loyalty status, dining credits, and more.
If you prefer to fly with one airline, such as American Airlines or Delta, then you may want to consider applying for one of their co-branded credit cards.
Although many major airlines have a tiered selection of credit cards to choose them, many of the benefits are similar and grow upon each other.
For example, many frequent fliers need to spend a certain amount to reach the next frequent flyer status level.
Applying for one of the airline’s co-branded cards can get you to the next level more quickly by offering up to 5x or 10x miles per dollar spent with the airline and a higher default flyer status than a customer who does not have the card.
Credit cards co-branded with hotel chains offer plenty of extra value for regulars of particular hotel chains.
Many of the hotel benefits are even more accessible to consumers because most hotel brands fall under a smaller umbrella of hotel conglomerates such as Hilton or Mariott Bonvoy.
Customers who hold co-branded cards like these can stay at any of the other brands owned by the conglomerate and enjoy the same benefits, including complimentary breakfast, an extra night for free, or a property credit to use for spa and dining services.
>> More:Cash Back vs. Travel Rewards
Travel Rewards Points and Miles
Travel Points and miles are some of the most powerful currencies for frequent travelers, so much so that there is almost a private economy of points transfers and conversion rates.
Although the terms are synonymous, there are a few minor differences to be aware of when shopping around for the right credit card.
How Do Travel Points Work?
Cardholders earn and accumulate travel points by charging their travel cards for everyday purchases, especially purchases with higher earnings multipliers.
For instance, if your card earns 4x points for gasoline and 3x points for streaming services, it would be ideal for you to use this card for these expenses to earn more points more quickly.
You can also often earn bonus points by referring other people for the same card and for earning introductory spending bonuses.
How Do Miles Work?
Miles are very similar to travel points but generally indicate that the card is associated with flights and airlines.
Earning miles is a powerful and effective way to save money on flights and other travel expenses.
If you are considering a travel credit card that offers either miles or points, try and ensure they will not expire.
Most of the major card providers do not have expiration dates, so try not to get caught in a situation where you can lose your points and miles.
How to Redeem Travel Rewards
Most major travel reward credit cards offer numerous redemption methods for your points and miles.
Depending on which card you have and how you plan on using your points and miles, there are few strategies to be aware of before booking a trip.
The most direct redemption method is to book travel through your card’s portal. If you have a traditional travel card, then you can book flights, hotels or transfer your points to an affiliate travel partner if that is an option.
If you are using a co-branded airline or hotel card, you will be able to book travel and utilize any other perks
Chase Ultimate Rewards Points
Chase Ultimate Rewards points are one of the most valuable and flexible rewards points on the market.
You can book travel directly through the Chase portal, transfer your points to hotels and airlines at a 1:1 ratio, or even cover your credit card purchases directly with points.
Capital One Venture Miles
Capital One has two primary redemption methods. You can directly apply your miles to existing travel charges to effectively “erase” the charge, or you can transfer them to a variety of Capital One’s travel partners.
Citi ThankYou Points
Citi enables customers to redeem their ThankYou points either directly through the Citi travel portal or through one of Citi’s travel partners.
If you choose to redeem through Citi, you will generally receive a redemption rate of $0.01.
What Are the Best Travel Rewards?
The best travel rewards provide a balance of practicality and flexible redemption options. If you live close to a major travel hub such as New York, Atlanta, Charlotte, Chicago, or Los Angeles, you may be able to get extra value out of a co-branded airline card.
However, if you prefer the flexibility of traditional travel points, you may want to consider a traditional travel card from American Express, Chase, or Citi.
Can You Use a Travel Credit Card on Anything?
Travel credit cards are issued by a major card carrier such as Visa, MasterCard, or American Express, so you can use them anywhere these cards are accepted.
The most important spending factor is to ensure you make the most out of your points earning categories.
How Do Travel Credits Work?
Travel credits are essentially discounts you can apply when you book travel through your rewards card’s travel portal.
Some credits are applied automatically, and some require you to choose how you will use your benefit.
For example, you may have a card that applies a credit for any expenses categorized as a travel expense, whereas another card will require you to select the credit and where to apply it.
What Credit Score is Needed for a Travel Credit Card?
Since most travel credit cards offer immense rewards and benefits, applicants usually have around a 700-credit score or higher to get approved.
How to Choose a Travel Credit Card
Since there are so many travel rewards cards on the market, it’s important to do your research and find a card that fits your budget and your spending habits.
#1. Shop Around and Review All Options
Travel credit cards are one of the most competitive products because each bank continuously tries to outdo its competitors by offering new features, simpler rewards strategies, and more luxurious perks. Prepare yourself by making a list of important features, so you have a shortlist of the top options.
#2. Look for High Rewards
Looks at your current credit card and bank statements and identify the categories you spend the most money on.
Once you have a solid handle on your spending habits, look for credit cards with the highest rewards options for those categories.
It wouldn’t make sense to get a credit card specializing in online streaming services if your primary expenses are groceries.
#3. Take Advantage of a Sign-Up Bonus
Sign-up bonuses are a large, upfront financial incentive to apply for a new credit card, and some can be worth over $1,000 depending on the credit card.
If you are interested in a new credit card, make sure it’s offering a substantial sign-up bonus.
#4. Understand the Rewards Structure
While there are many similarities in travel credit cards across the board, take the time to dig into what they are offering.
Find out if the points are transferable if they expire and how often you will have the opportunity for bonus rewards.
#5. Friendly for International Travel
Traveling internationally can be a life-changing experience, but if you’re stuck with 3% foreign transaction fees for your entire trip, you will most likely lose some enthusiasm.
Make sure the travel card you apply for does not charge any foreign transaction fees to avoid this pitfall.
#6. Know the Associated Fees
Many mid-tier and premium travel credit cards charge annual fees to offset some of their associated benefits, so make sure you fit those into your budget as you apply for a new card.
This is an excellent example of finding a card with a hefty introductory bonus because that can pay for your annual fee for years to come.
#7. Look for Bonus Offerings
Finally, check to see what your card issuer offers additional benefits. Some of these side benefits can be worth thousands of dollars over the long haul:
- Baggage Protection: Many mid-tier and premium travel cards offer baggage protection which can be a lifesaver if your baggage is lost or delayed during travel. Although different cards offer coverage with slight differences, a majority of coverage will kick in if your baggage is delayed by six or twelve hours. Coverage usually includes a credit for food, clothes, and other essentials up to a stated dollar amount.
- Rental Car Coverage: Rental cars are often a necessity for travelers because they provide mobility and the ability to travel a new area affordably. Many travel credit cards offer either primary or secondary rental car insurance, and it is vital that you check which coverage is provided by your bank. Primary coverage supersedes any other coverage and will not show up on your insurance statement if you have to file a claim, but secondary coverage kicks in after your personal insurance has been used up.
- Travel Insurance: Travel credit cards provide many different travel insurance coverages, and many of them only qualify if you booked the trip with that card. Different coverage lines include emergency evacuation, medical treatment, and emergency food and lodging.
- Priority Boarding: Priority boarding is reflexive airline loyalty status, flight section, or a combination of both. When you get priority boarding, you get to go to the head of the boarding line and be among the first travelers on the plane.
- Discounts: Many travel cards provide discounted bookings through their online travel portals or through partner carriers. If you want to ensure you’re getting the best deal on a booking, check to see if your bank or credit card carrier has any partnerships with other travel companies.
- Free Checked Bags: Checked baggage can easily bump flight costs by a few hundred dollars, so if you are a frequent flyer with an airline credit card, be sure you book your flights with it. Many airline cards offer credits for free checked baggage which can save you lots of money.
Bottom Line: How Do Travel Credit Cards Work?
Hopefully, you can see the immense power and potential of finding a travel credit card that fits your lifestyle.
Since there are so many options on the market, it pays to do your research and find a card that works the best for your budget and lifestyle.
Once you find the right card, you can begin racking up travel rewards and preparing for your next big trip, whether it’s 100 miles away or 10,000 miles away.