Tips for choosing a credit card for travel benefits
Jason Skinrood earned more than 100,000 points and miles by paying for a Utah house he built, from construction materials to labor, using his Visa and American Express cards. Then Skinrood, who runs the credit card comparison website PlasticRewards, and his wife and two kids took a trip to Arizona using miles for flights and points for their Westin hotel, saving them $1,500. Tim Leffel, author of “Make Your Travel Dollars Worth a Fortune,” flew roundtrip to Eastern Europe, Southeast Asia, and South America last year using miles acquired through his credit cards. His flights would have cost $5,500. Instead, with creative spending, sign-up bonuses for his two American Airlines credit cards, and some online research, it cost Leffel 65,000 miles and $170 in taxes.
Brian Kelly, a former Morgan Stanley associate who runsThePointsGuy.com, racked up 500,000 points from credit card rewards in one year. Using these points, he took a 10-day trip to Paris and the Seychelles worth $15,000. He also flew round trip to South Africa — in first-class seats valued at $7,500 — for $125 in taxes and 110,000 miles.
“The juice and glory in frequent flier miles is leveraging them,” says Kelly. “You can travel a lot better than you ever thought you could if you just pay attention to how to get miles and redeem them.”
Credit cards are one of the easiest ways to earn miles, points, and cash back. With so many variables, however, it’s important to find the card that best suits you and your travel needs.
ThePointsGuy.com’s Brian Kelly uses the points he racks up to fly free and travel first-class, as here on Lufthansa.
If you tend to fly a particular airline, consider getting that airline’s credit card, such as the Gold Delta SkyMiles card or the United MileagePlus Explorer card. You typically get a hefty sign-up bonus, often enough to take a free flight instantly, and travel perks such as a free checked bag, priority boarding, and extra mileage credit if you use that card to purchase flights. Certain Alaska Airlines and US Airways credit cards even offer $99 companion tickets each year. Sticking with one airline gives you additional perks. Earn enough points on an airline credit card, for instance, and you may receive priority check-in, free in-flight Wi-Fi and media players, and airport lounge passes.
GENERAL TRAVEL CARDS
Some travel credit cards, like the Chase Sapphire Preferred card, offer bonus points upon sign-up (after making qualified purchases) and let you earn points with every purchase to pay for flights on many airlines and for other travel services, from rental cars to Broadway tickets. Or you can sign up for a cash-back travel card, like the Capital One VentureOne card.
These work like the airline cards and typically offer sign-up bonuses. The Marriott Rewards Premier credit card, for instance, offers 50,000 bonus points if you charge $1,000 within the first three months, and gives you one free night when you sign up and a complimentary stay every year on your sign-up anniversary. With a hotel credit card, you earn points for purchases, often one point per $1 for any purchase and up to five points per $1 for purchases at the property. You may receive other bonuses once you start racking up points, like easy check-in and check-out, room upgrades, complimentary parking, and free breakfast.
CONSIDER THE APR
Make sure you check the annual percentage rate (APR) before signing up for a travel rewards credit card. Their APRs tend to run higher than other credit cards, typically between 15 and 25 percent, so if you will have a balance from month to month, you may end up paying more in interest fees than you’ll gain in travel rewards.
PAY ATTENTION TO ANNUAL FEES
Many travel rewards credit cards have annual fees that cost up to $95, but can run as high as $495. Make sure the benefits you receive offset the fee. Typically, if you get a free night’s stay at a respectable hotel, or if you take at least two trips a year and get free checked luggage each way, you’ll cover this fee in no time.
ASK ABOUT FOREIGN TRANSACTION FEES
Before traveling outside the United States, find out if your credit card company charges a foreign transaction fee, which can boost your bill by up to 3 percent of what you spend while out of the country. Capital One and Discover typically waive these fees. Some companies, like American Express, have dropped the fee on their premium cards.
IMPACT ON YOUR CREDIT SCORE
Before you apply for every enticing credit card offer that comes your way, keep in mind that it affects your credit score.
“When you apply for a card, you get a 2- to 5-point ding to your credit score,” says Kelly. “I personally have 17 active credit cards, but my credit score is excellent because I pay everything off on time. That’s the number one thing. You can get two or three cards a day twice a year and your score will be fine, as long as you’re paying off your bills.”
FREE OR AFFORDABLE INSURANCE
Some credit cards offer free travel insurance, covering trip cancellation and delays, baggage loss, and even car rental insurance. Beware, however, that “most credit cards offer secondary coverage on rental cars, which kicks in after the primary coverage — typically your auto insurance — covers the difference,” says Sorab Bhardwaj, founder of Zalyn, a website that tracks car rental coupons and discounts. If you don’t want to tap your personal auto insurance, which can boost your annual rate, consider getting American Express Premium Car Rental Protection. Your American Express card is charged $24.95 each time you use it for a rental, giving you up to $100,000 coverage with no deductible.
EASY WAY TO EARN POINTS
“We charge all of the monthly expenses we can, like groceries, gasoline, and some utility bills, to a credit card and then pay it off each month,” says Skinrood. “We’re spending money that we would normally spend anyway, and we get free hotels and free flights.”
GET CREATIVE WHEN USING MILES
“One time we used our air miles for a free round trip to Disney World for four,” says Fred Detinger of Bellingham, Wash. “We booked our outbound flights for odd times so we could get there when we wanted. Then we booked an early return on a busy Friday night knowing that flights would likely be oversold and volunteered all four of our seats on both hops home. Nothing like getting free round-trip tickets for the whole family when you are already flying on free round-trip tickets.”
TEAM UP AND MAXIMIZE SAVINGS
“One of the most effective ways to maximize rewards on a travel credit card is to add authorized users to your account like a spouse or domestic partner so you can team up and focus on spending and earning,” says Ben Woolsey, director of marketing and consumer research for CreditCards.com.
EARN POINTS THROUGH WEBSITES
Many websites serve as shopping portals to such mainstream stores as Target, Macy’s, and Best Buy, or to travel merchants like Hilton, Expedia, and Avis. Access these stores and merchants through an airline or hotel’s online shopping mall, such as Delta’s SkyMilesShopping.com, and make your purchases. You can receive bonus miles or points, or even cash back. Booking online also enables you to use online travel coupons, so you can stack your rewards.
“Credit card companies aren’t here to give away money, but if you know the rules, you can outsmart them,” says Kelly.