How do travel rewards credit cards work?
Travel rewards credit cards are very similar to air miles credit cards and frequent flyer credit cards, and may in some cases be one and the same. It will depend on what rewards are being offered for your points. Rewards cards may well include all manner of travel rewards, such as flights, cruises, hotel accommodation and car hire. We’ve also included cards that feature complimentary travel insurance. For more detail on these specific options see our section on cards with travel insurance.
Travel Rewards Credit Card Comparison
Rates last updated January 26th, 2015
Table of Contents: Guide to Travel Rewards Credit Cards
- Compare travel rewards credit cards
- How do I to earn points?
- What sort of rewards can I get?
- Pros and Cons of Travel Rewards Credit Cards
- How to compare travel rewards credit cards
- Tips to using rewards credit cards
How to earn points with a travel rewards credit card
- Spend money and shift regular spending. You earn points on a travel rewards credit card as you would accumulate points on any rewards credit card – by spending money on it. It’s important to check what an eligible purchase is in order to gain points. Moving your regular expenses over to your travel rewards credit card could add many hundreds of dollars to your balance, and it will all count. However, you must be careful if you do this. If you fail to clear your debt, you will be charged interest, and that will far outweigh any benefits derived from your points.
- Loyalty purchases made with credit card partners. It may be the case that you can accumulate bonus points when you spend with the travel companies that are partnered with the credit card. It therefore pays to know exactly which these partners are, so you can take full advantage of any spending you are about to do in a related area.
- Introductory bonus points. Look out for introductory offers on your travel rewards credit card, where more points per dollar can be awarded for the first one to three months. Or you may receive a large lump sum of points just by making an initial purchase. Bonus points are certainly worth claiming as they can often be enough for you to claim your first reward. Beyond this time, also keep an eye out for any special offers on the credit card’s website.
Be aware that points will not be awarded for any cash transactions made on the card, nor any balance transfers made to it. They are only gained when you spend on purchases or services.
What are my points worth?
Points earned per dollar will vary according to the provider and the prestige of the credit card, on average it’s one point per dollar spent. To find out how much you could be earning, please make sure you check the terms and conditions. While you need to know how many points per dollar you will earn, it’s more important to know how much dollar value is then assigned to your points upon redemption.
How can I check how many points I have?
This will normally be listed on your credit card statement, but if you want to keep a more regular check on things, you can go to the card’s website and check your personal account. You will need to be registered for this, but that only takes a few minutes to set up.
What sort of rewards can I get?
This will again depend on your credit card provider, but the types of rewards you can normally expect with a travel rewards credit card are mostly travel-related. These will include flights, brochure holidays, hotel accommodation, car rental, days out, and more. You may also find offers outside the travel arena. This is another area for you to research beyond the headlines so you can be sure the card suits your purposes and the kind of rewards you are after.
How do I redeem my points?
Your credit card provider will have a website where you can check how many points you have accumulated on your travel rewards credit card. It will also show you what rewards are available and how many points you will need to claim them. If you are happy that you want to go ahead and make a redemption, then you will be able to do so via the site or over the phone with a customer service representative. You should be able to claim a reward even if your points fall short by making up the remainder in cash.
Pros and cons of travel rewards cards
- Pay your bills and earn points. As long as you pay the balance off every single month, you’ll start to see the points piling up.
- Free points for paying on time. Some travel rewards cards offer the incentive of extra air miles/frequent flyer points if you pay more than the minimum amount every month, pay on time, or pay it off in full, so be sure to compare cards before you settle for one and see which would suit your lifestyle.
- Bag a free flight. Regular long-haul travellers are able to amass points at an astonishing rate if they use their credit card to pay for their travels, as well as everyday goods. The points earned can then be exchanged for a flight, part of a flight, or upgrade. Although, you really do need to use your credit card regularly before you’re able to accumulate a large number of points.
- Complimentary travel Insurance. Insurance can be costly, so take advantage of the travel insurance deals linked to many rewards cards. Even if the card comes with an annual fee, buying separate travel insurance will often cost more.
- Earn points through partners. Most deals linked to travel reward cards will allow members to earn points through a number of affiliated businesses. For example, members could earn double points when they stay at partner hotels, or when they hire a car through Avis or Budget.
- Redeem points on partner carriers. While most travel rewards cards are affiliated to one particular airline, you can use points earned to book flights on partner airlines. For example, Qantas is part of the oneworld alliance, so you can redeem points on other oneworld alliance carriers, such as British Airways, American Airlines, Cathay Pacific, Jetstar and more.
- Points real worth. It takes a considerable amount of time to accumulate points when using your credit card as the offers available are generally 1 point for every $1 spent, and sometimes you need to spend $2 to get 1 point, depending on what credit card you have. But to really understand the system you need to look at what the points are worth in real terms.
What are my points really worth?
You may earn 21,000 frequent flyer points on a return trip from London to Melbourne with Qantas, but to earn the 21,000 by using your credit card, if you spend $400 a month it would take just over 52 months, that’s almost 4½ years, to accumulate the same amount of points. And if you use their Points and Pay system, which allows you to offset points against part-payment on a flight, 21,000 points gets you a whopping $150 off a flight from Melbourne to Broome. Not much for 4½ years of constant card usage. However, if you choose to directly redeem the points on a flight, 22,000 points can get you a return economy flight from Melbourne to Adelaide.
With Qantas, you need 24,000 to upgrade from Economy to Premium Economy, so using the same example of $400 per month spend on your card, it would take 5 years to accumulate the points. And if it’s 60,000 to upgrade to Business, you could have nurtured a preteen by the time you’re able to sit at the pointy end of the plane.
- Hidden costs. Remember, when you redeem your points on flights you may need to pay surcharges, fees and taxes, which vary from country to country and airport to airport.
- Pay per month. While it’s important to pay your credit card off every month, not everyone does, no matter how good their initial intentions. If you do get into the habit of not paying the balance off regularly you’ll end up in so much debt there’s no chance you’ll be able to afford a holiday, and therefore you may lose your accumulated points.
- Point depreciation. The old saying, “You snooze, you lose”, applies here. If you let the points sit on your card for too long they will be worth less in monetary value over the years, and therefore won’t take you as far, so remember to redeem them regularly.
- Limited lifetime. Most airline carriers that have a frequent flyer system have limitations on the life of the points. However, it only applies to non-active members. So, if you have points accumulated but you haven’t earned or redeemed any with your affiliated airline you will lose the points after a set timeframe.
How to compare travel rewards credit cards
The key point when you compare travel rewards credit cards is to realise that you should also be looking to compare these cards with air miles credit cards and frequent flyer credit cards, because they may well possess practically all the same benefits. Equally, you could take a look at regular credits cards, because many also offer air miles and travel rewards.
Who are travel reward cards best suited to?
- Regular flyers. A travel rewards credit card will have as part of its rewards the option to exchange points for flights. This means they are great for anyone who flies frequently, whether for personal reasons or as a self-employed businessperson who has to pay for their own tickets. If you are already a member of a frequent flyer program, adding points from a travel rewards credit card will be a sensible move. Most credit cards of this type give a choice of partner airlines.
- Holidaymakers and travellers. Anyone who likes to get away for a few days or weeks on a regular basis will benefit from this type of card because they will be able to offset part of the cost by supplementing with their rewards.
- Credit card users. If you use a credit card for your spending, then you are already doing the hard part, namely spending. Therefore you may as well get something back for your outlay, and travel rewards should offer something for everyone.
Travel rewards credit cards may not suit
- Stay-at-home types. If you don’t get the travel bug much, then you may want to consider a more regular rewards credit card.
- Reckless souls. If you are prone to spending on your credit card without good reason, then a travel rewards credit card may not be a good idea.
- Poor credit cases. A good credit rating is required to apply for any rewards credit card. Making an application that will fail due to a poor rating will only serve to lower your credit score even further.
What should I look for when I compare travel rewards credit cards?
This is a very important question when you compare travel rewards credit cards. You need to know how your spending will be rewarded, and what exactly are the main determining factors that make the card one you should grab, or one you should avoid.
- The partners involved. You need to know which airlines, companies or services are partnered with the credit card rewards program. They must offer rewards you already use, or could be reasonably excited about using.
- The variety of rewards. How limited are the rewards on offer? Travel-related rewards should include flights, holidays, hotel stays, cruises, car hire, airport parking, etc. But are there other rewards outside the travelsphere? This may be important if you suddenly find yourself in a position if you are unable to travel.
- Air miles & frequent flyer schemes. Are the airlines involved ones that fly routes of interest to you? Does the credit card require you to join an airline’s frequent flyer program. If so, is it complimentary?
- Bonus points and introductory incentives. Does the card offer bonus points for the first one to three months of card ownership? These will often allow you to earn double or treble the average one point per dollar. This could allow a reward to be claimed pretty quickly.
- How many points per dollar? This is very important and you will normally find an ongoing exchange of one to one. However, you must investigate the value of your points when it comes to redemption. Different programs assign different values to their points.
- Extra benefits. This may include free travel insurance. You may have to pay a fee for an air miles program that offers this, or it may well come standard with gold or platinum cards.
- Program fees. Annual fees for rewards schemes can make the difference between a program earning you or costing you. If your travel rewards credit card involves an annual fee for the rewards program, on top of annual card fee, then you must do some calculations to make sure this will not outweigh any benefits derived from it. The fees involved in a more prestigious platinum credit card may be justified by the associated perks, but this will depend very much on the level and type of use.
- Don’t forget the usual suspects. Don’t forget when you compare travel rewards credit cards to check out the Annual Percentage Rate, the annual credit card fee, the amount of interest-free days, and any charges that could be applied if you break the terms and conditions.
Tips for travel reward cards
Don’t overspend for any reason, especially not to earn extra points. If you spend so much on your card that you are unable to pay off your balance every month, then you will attract interest charges that may well negate the value of the points you earn.
Points are only awarded on purchases and services; they are not awarded for cash transactions such as ATM withdrawals or buying foreign currency or traveler’s cheques.
You cannot properly compare travel rewards credit cards if you do not read the Terms & Conditions for each of the cards of interest to you. This must be done before signing on the dotted line so you are aware what you are getting into, and what you will get out of it.
How to use a travel rewards card
Travel rewards credit cards earn points when you spend on them. That does not mean with should go crazy and buy items you don’t need, but as you probably chose the card for the purpose of points building, you ought really to start racking some up. These are a few areas you might consider to increase the points on your card without starting to spend for the hell of it.
- Monthly expenses. The more you spend on your travel rewards credit card, the more points you will accumulate. Making purchases and paying for services will all count. That means you could certainly look to shift some of your regular spending to your travel rewards credit card to bump up the monthly balance. This may include groceries, fuel for your car, utility bills, mobile phone bills. The caveat here is that you are not left with a debt you cannot clear. Interest charges will destroy the value of the points you have earned. If you use a credit card where you once used cash or debit card, you must still set aside that money to cover your credit card bill at the end of the month.
- Be loyal. Provided it suits you, use the credit card’s partner companies to earn extra points. Switch your allegiance to any affiliated hotel chains, travel operators, or car rental companies. Using your credit card at these places may earn you extra loyalty points.
- “Honeymoon” offers. Make use of any introductory offers on your travel rewards credit card before they expire, which may be in one to three months. These may enable you to build up a mass of bonus points very quickly, and even earn a reward straight away.
- Additional cards. You might think of adding another cardholder to your account so that their spending will also count towards your points.
- Be a martyr. Pay for group or family purchases, such as holidays, with your travel rewards credit card to build up points. Look a bit hard-done-by when you do it so they don’t know what you’re up to, then get the cash back from them.
- Use your credit card more frequently. The majority of airline miles credit card rewards programs offer you points for each dollar you spend on your card. It makes sense that by using your card to pay for expenses, bills and purchases, you’ll be accruing points more quickly. However, if you’re paying for your expenses each month using your credit card, it’s important to remember to pay down your balance as quickly as possible. Otherwise you could find that you’re paying huge amounts of interest that could cost you far more than the rewards you’re receiving.
- Shop with bonus partners. Your credit card rewards program should offer you a list of retailers and stores that are bonus partners. When you shop at these outlets, you could be awarded bonus points. By using your credit card to pay for the purchases at these stores, you’ll effectively be earning far more points than you normally would by shopping at a different outlet.
- Fly more frequently. There are several incentives offered by many airline card rewards programs that help you boost your points when you fly more frequently. You could earn points for purchasing your airline tickets, which means several short domestic flights could earn you more points than one longer, international flight.
- Pay for flights using your credit card. When you use your credit card to pay for your flights, you could be earning more than just the airline card rewards points. You could also earn bonus points, a preferential interest rate or other travel perks, too.
- Ask for credit card rewards points. You might be surprised by the range of airline card rewards available on various goods and services. Most people just don’t ask if there are points available on the things they buy. You could find you’re earning reward points on things like hotel accommodation, car rentals, real estate agent’s fees, insurances and plenty of others.
- Shop around for a better credit card offer. You could easily maximise your airline card rewards points by shopping around for a better credit card deal offering a better rewards program. Use an online credit card comparison site to see if another credit card provider can offer you a better deal on earning more airline rewards points.
Spend wisely on your card
- Stay within your budget. Keep the ‘monthly expenses’ advice at the top in mind for all your purchases, so that you can always pay off your credit card in full every month. Unavoidable expenses are one thing, but willfully spending beyond your means for any reason is poor practice.
- Avoid cash transactions and balance transfers. These should not occur on your travel rewards credit card. They will not earn you any points and could cost you dearly. Cash withdrawals are charged at a higher rate than your purchases, and are not subject to your interest-free days. They will also attract a cash-handling fee. Balance transfers, even with a fantastic 0% deal, could cause trouble all their own.
Now you know everything there is to know about Travel Rewards Credit Cards!