Travel credit cards offer miles, rewards, and points that can be redeemed for free flights, upgrades, hotels, or cash back-style bonuses.
They can be specific to one company, such as American Airlines or Hilton, a group of related companies, such as the Oneworld Alliance. Or, they can be “general rewards” credit cards whose points can be redeemed at a variety of hotels, airlines, and other travel partners.
That’s already a ton of information! How on earth do you go about picking the very best travel credit card?
The truth is, there isn’t one. But that doesn’t mean that there isn’t a very best travel card for you. Specifically, one that will help take you to where you want to go for less.
To help you determine which card is best suited to your travel style, we’ll break down different types of cards and incentives, as well as what to look for in cards to help you compare offers.
Understanding Travel Credit Cards: General vs. Co-Branded
A travel credit card is different from one that merely offers users cash back. Instead, these cards work by giving you points or miles for your day-to-day spending, such as gas, groceries, and more. In most cases, the ratio of points earned per dollars spent is one-to-one. Meaning that if you spend $3000 in a month, you’ll earn 3000 points.
Some travel credit cards fall under the “general” category, meaning that they can be redeemed for benefits through most major airlines or hotels. These cards are offered by banks themselves and are branded as such. The Chase Sapphire Preferred Card and Capital One Venture Card are two such examples.
Then, there are travel credit cards that are associated with a specific airline—called “co-branded” cards. American Airlines’ AAdvantage and United Airlines’ MileagePlus cards are two examples of co-branded cards.
See Also: The Best Airline Rewards Card of 2016
Since airlines and hotel chains aren’t banks unto themselves, how do they offer savings?
Hotel chains, airline alliances, and individual airlines will partner with banks, e.g. Chase or Citi, to create a branded card. In this mutually beneficial exchange, the hotel or airline will sell their loyalty points (which can be redeemed for travel or hotel stays) to their partner bank at a discount.
In return for the discounted loyalty points, the hotel chain or airline receives guaranteed, prepaid funds to offer to their customers in the form of a travel credit card.
You’re getting credit—the freedom to buy something now and pay for it later. In this case, you’re also getting miles points for American Airlines through the bank, who doles out the points they received at a discount as an incentive to keep you spending.
It’s important to understand how travel credit cards work, not only because it’s a mutually beneficial system for everyone involved, but because these cards deliver both credit and points, they typically have higher APRs than cards that aren’t paired with travel incentives.
Meaning that, if you aren’t going to take advantage of a credit card’s travel-related benefits, you’re best going with a different type of card altogether.
Miles, Rewards, and Points: Which Incentive Is Right for You?
Before you pick a travel card because it offers the biggest sign-up bonus or the lowest interest rates, know that rarely is one single card best-suited to everyone’s unique travel aspirations.
Instead, each credit card offers a unique mix of benefits and drawbacks. Depending on the card, some are better at accumulating:
- Miles: These are used to earn free or discounted upgrades or tickets.
- Rewards: Can be used on hotels and car rentals.
- Points: Most often used in exchange for cash back.
How to decide which kind of card you should focus on? Start by asking yourself, not what your frequent habits are, but your greatest pain points. Basically, what do you hate most: Paying for your ticket, your stay, or for things to purchase while you’re there?
To keep things relatively simple, we’re going to focus on picking a travel credit card that helps you accumulate miles. However, we’ll briefly include resources for those more interested in rewards and points below.
Do You Fly Often, But Rarely Stay at Hotels? You Want More Miles
For most of us, the major pain point is purchasing plane tickets, plain and simple. Whether you fly a lot or only ever so often, few things bite more than plunking down hundreds (or thousands) of dollars on a single ticket.
If that best describes you, then search for a travel credit card that offers a big sign-up bonus and a strong ratio of miles earned to dollars spent.
Not so quick to the credit card applications! The next question to ask yourself is if you prefer staying loyal to a single airline or would get more use out of accumulated miles that can be transferred as needed.
For example, the highest roller when it comes to sign-up mile incentives at the moment is the Chase Sapphire Preferred Card. It offers 50,000 miles as a sign-up bonus after you’ve charged your first $4000.
However, the Chase Sapphire Preferred Card lacks many of the perks associated with airline-specific co-branded cards, such as free upgrades and checked luggage. So, if you frequently fly a specific airline, you're better off applying for their co-branded card.
Which Co-Branded Card is Right for You? Consider Your Home Airport
If you’re interested in the perks of a co-branded card, but don’t already frequently fly a single airline, your best bet is considering which airlines are based in your home city’s airport.
If you don’t already have an idea which airports you prefer to fly from, Travel Math provides a handy tool for finding airports near you:
- Use the search box on the right side of the page.
- Input your city and state.
Once you know which airports are near you, head to the Wikipedia page for those airports. Scroll down to the “Airlines and Destinations” section to determine which airlines operate near you.
For example, let’s say you live in Miami, Florida. Since Miami is an American Airlines hub, and AA is a member of the Oneworld Alliance. By selecting a Oneworld Alliance card, you increase the speed in which you’ll earn enough miles to trade in for a ticket.
Pro Tip: If you frequently fly to a single destination, or have your heart set earning miles to reduce the cost of a specific trip, cross reference the list of airlines with those that fly to that destination and ta-da! You now have an even better idea of which co-branded airline travel credit card is best.
Do You Also Stay at Hotels During Travel? You’re Interested in Rewards
Instead of diving deep into company-specific rewards credit cards, we suggest that you start by signing up for loyalty programs.
The chances are that at some point in the last year, you’ve booked a hotel room or rented a car without signing up for that company’s loyalty program. If you’re in the market for a travel credit card, not signing up for a loyalty program is like throwing your dollars out the window.
Every single booking that you make, from flights to hotels, should be earning you points. This means that, before you swipe your card, you need to take the time to sign up for a company’s loyalty program.
Of course, this is going to leave you with rewards points scattered around multiple different companies. To start taking advantage of loyalty programs, start sticking to one “family” of companies, whether an airline alliance or hotel chain.
Do You Rarely Travel, But Want Points to Pay for Other Stuff?
As we mentioned above, travel credit cards typically charge higher APRs than a card that doesn’t offer travel-related incentives.
If you fall into this category, you’re likely better off finding a card that focuses on other types of benefits, such as cash-back or low APRs. Learn more about different types of cards and which might be a good fit in 4 Types of Credit Cards Responsible Consumers Use for Big Rewards.
4 Points to Consider in a Travel Credit Card
Here are some basic ins and outs to help you get the biggest travel bang for your credit card buck:
1. Bigger Sign-up Bonuses: Many travel credit cards offer thousands of points just for signing up—often enough to cover at least a domestic flight or round trip upgrade. Look for a card that offers at least 30,000 points to start, or it may take too long for you to earn your first redemption.
2. High Earning Potential: Most travel credit cards offer one point for every dollar spent. However, cards that are the best fit for you will offer extra points when you shop at certain retailers—hopefully ones you already frequent.
3. Low Annual Fees: No one likes paying annual fees for credit cards, but those who travel a lot will find that fee-based cards tend to give better travel rewards schemes. This allows you to accumulate points faster, as well as gives you better access to services, special offers, and stronger travel protection. Additionally, most card companies waive their annual fee for the first year to encourage sign-ups. By choosing wisely, you can save much more on travel than what you’ll spend on the annual fee.
4. Competitive Foreign Transaction Fees: The majority of credit cards charge a 3% fee for use overseas. This can often negate the great conversion rates that users hope to get while traveling. Depending on how frequently you travel, you may want to look for a card with zero conversion fees or sign up for a travel fee-free card, such as the Charles Schwab ATM card, specifically for overseas spending.
How to Use and Track Your Travel Miles Like a Pro
Are you struggling to keep track of multiple miles, rewards, and loyalty programs? Join an online mileage manager! Awardwallet.com is a free site that will track your balances in one convenient spot and even alert you if your miles are going to expire. Other managers include usingmiles.com and Tripit.com.
Keep in mind that most airlines will allow you to book one-way flights for half the miles, so you can mix and match airlines for your outgoing and returning flights. This comes in handy when some segments of your trip aren’t available, or you’re planning a complicated itinerary.
Will Applying for a Travel Credit Card Hurt My Credit?
Your credit score will slightly dip with each new “hard inquiry”—that means any credit or loan application you submit for approval, but doesn’t include checking your credit score. However, the dip dissipates quickly. Plus, having a lot of available credit to a low debt ratio is much better for your score!
Bottom line? Unless you’re looking to purchase a car or a home within the next six months, applying for a new card won’t meaningfully affect your credit standing.
Who Shouldn’t Apply for a Travel Credit Card?
Travel credit cards aren’t right for everyone. In my experience, travel credit cards aren’t a good financial fit if you:
Have poor to average credit. In general, travel credit cards are considered “elite” products and often require good-to-excellent credit scores. Be sure your FICO score is a minimum of 650, but 700 is preferred.
Don’t pay off your balance every month. As we previously mentioned, the finance charges on a travel credit card are higher than other credit cards. No amount of points is worth being eaten alive by high charges!
Are inflexible or impatient with your travel plans. Do you have your heart set on a specific flight? Doing so, especially during peaks seasons, might be extremely difficult or require extra miles.
Don’t spend much monthly or are uncomfortable with charging. Many travel credit card bonuses are contingent on meeting their spending requirements. If you’re unlikely to spend that amount or uncomfortable charging purchases, there’s no point in applying for a card.
Comparing Travel Credit Card Offers
Now that you’ve (hopefully) become a member of any loyalty programs offered by airlines that you regularly use, understand how travel credit cards work, the difference between miles, points, and rewards, it’s time to start thinking about which card is best for you.
Just like no two dream vacations are the same, your needs for travel credit card perks are unique. Think about why you want to use the card and what purchases it will most frequently be used for.
A few final tips for maximizing travel credit card offers:
1. Strategize. Don’t just sign up for every card with an okay offer. If you have a particular trip or goal in mind, concentrate your efforts on the cards that will get you the most miles for the airline that’s going to get you where you need to go, as well as the hotel where you want to stay.
2. Don’t just concentrate on the sign-up bonuses. The best cards out there are the ones that allow for sustainable points earning through your spending habits. And, for that matter, make sure you are putting every expense possible on a points-earning card so that you are maximizing your earning potential.
3. Do your homework. Got your goals in mind? Great! Now check out The Best Travel Card of 2016: Why Miles Aren’t Just Miles to help you find the card that best fits your travel and spending styles.
Remember, the whole “point” of travel rewards points and miles is to find value. So, if you find a credit card that will offer something of value to you, that makes it a good offer. Decide what your goals are and pick the card or cards that will get you there.
More on Travel Credit Cards:
- 4 Types of Credit Cards Responsible Consumers Use for Big Rewards
- 7 Credit Card Hacks You Can Use to Raise Your Credit Scores & Reap Rewards
- A Complete Beginners Guide to Frequent Flyer Programs
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