Travel rewards can seem overwhelming when you’re first starting out, but a handful of cards can make the process easier. Find out which travel credit cards we recommend for beginners and why.
Getting started in travel rewards can feel overwhelming, and that’s especially true when you’re deciding which credit card to start with.There are numerous card issuers and rewards currencies to choose from, and even then you’ll find a plethora of travel credit cards with different (and often confusing) benefits attached.
So, what’s the best way to dive into travel rewards when you’re first starting out? Ted Rossman, senior industry analyst at CreditCards.com, says most people should “dip their toes” into travel rewards with just one card or potentially two rewards credit cards that have complimentary rewards and benefits.
“Walk before you run,” he says, and play around with travel credit cards before you settle on a long-term strategy. You may find you like one type of reward points more than another, or that a specific credit card loyalty program better aligns with your spending habits.
Rewards currencies you can earn
Rossman says picking a rewards currency to focus on is one of the trickiest parts of getting off the ground in the travel rewards game. This is mainly due to the fact there are so many types of rewards to earn, and that they all work so differently.
As you get started in travel rewards, here are the “rewards currencies” you can choose to focus on:
- Flexible travel rewards like Chase Ultimate Rewards, American Express Membership Rewards or rewards in the Citi ThankYou program, which can be redeemed for travel or transferred to airline and hotel loyalty programs
- Flat-rate travel rewards, which can be redeemed to cover travel expenses charged to your credit card
- Cash back rewards, which can be redeemed for statement credits, gift cards and other options, or combined with other flexible rewards currencies in some cases
- Airline miles with American AAdvantage, United MileagePlus, Southwest Rapid Rewards and other frequent flyer programs
- Hotel loyalty points with programs like Hilton Honors, World of Hyatt, IHG Rewards and more
Looking at these rewards currencies, it’s easy to see why one type might work better for some consumers than others. For example, hotel loyalty points may not be ideal if you rarely stay in hotels and you prefer to earn miles you can use to cover flights. Of course, you may feel the opposite if you hate flying and really want to earn some free nights at a hotel or resort you can drive to.
In the meantime, flexible rewards tend to strike a happy medium since they can be used in more than one way. For example, Chase Ultimate Rewards points can be used for travel through the Chase portal, transfers to Chase airline and hotel partners, gift cards, merchandise, statement credits and more.
However, flexible travel credit cards don’t normally offer some of the cardholder perks you get with cards from specific airline or hotel programs, such as a free checked bag or automatic elite hotel status.
Best travel credit cards for beginners
Which travel credit card to try first is a personal decision, and it should be based on the type of rewards you want to earn and the perks you want the most, as well as the level of annual fee you’re comfortable with (if any).
However, it can be difficult to know which type of rewards to focus on when you haven’t tried any of the programs out yet. With that in mind, travel rewards expert Jason Steele says it can be beneficial for newcomers to try out flexible travel rewards cards first.
“Too often, people who earn points or miles with a single hotel or airline program find that they can’t effectively redeem their rewards for the flights or hotel rooms they need,” says Steele.
With flexible rewards programs, on the other hand, you have multiple options in case one doesn’t offer reasonably priced rewards.
Which flexible travel credit cards should you consider? Steele recommends the following options for anyone considering travel rewards:
|Welcome bonus||Earn 100,000 Chase Ultimate Rewards points when you spend $4,000 within three months of account opening||Earn 60,000 bonus miles when you spend $3,000 in the first three months||Earn 60,000 Membership Rewards points when you spend $4,000 within six months of account opening|
|Rewards|| ||2x miles on all purchases|
|How to redeem||Redeem for statement credits, gift cards, merchandise, travel through Chase for 25% more value or 1:1 transfers to Chase airline and hotel partners||Redeem for travel statement credits or for transfers to Capital One airline and hotel partners||Redeem for statement credits, gift cards, merchandise, travel through AmexTravel.com or transfers to Amex airline or hotel partners|
While the flexible travel credit cards featured above can work well for practically anyone, Rossman says some consumers could also consider an airline or hotel credit card in special circumstances. For example, a family who already has a trip booked with a specific airline could consider an airline credit card that offers some bonus miles and a free checked bag benefit.
“You’re paying a $95 annual fee, and you can skip checked bag fees,” he says. “If you’re a family of four, even one trip can get you ahead with an airline credit card that waives the first checked bag.”
An example of a beginner card that might work in this situation is the Citi® / AAdvantage® Platinum Select® World Elite Mastercard®, which waives its $99 annual fee for the first 12 months. New cardholders can earn 50,000 bonus miles when they spend $2,500 within three months of account opening. In the meantime, they are eligible for a free checked bag on American Airline flights for the cardholder and up to four companions, preferred boarding and other frequent flyer perks.
Co-branded hotel credit cards could be attractive too, says Rossman, particularly if you have a trip booked with a specific hotel brand or you’re planning one right now. For example, the Hilton Honors American Express Card doesn’t charge an annual fee, yet cardholders can earn 80,000 Hilton Honors bonus points if they spend $1,000 on eligible purchases in the first three months, plus an additional 50,000 bonus points if they spend a total of $5,000 in purchases in the first six months.
Not only does this card let you earn generous rewards on Hilton hotel stays, U.S. restaurants, U.S. gas stations and U.S. supermarkets as well as other purchases, but it comes with automatic Silver Elite status in the Hilton Honors program. This status will get you bonus points on paid hotel stays, free bottled water in Hilton properties, a fifth night free when you book at least four consecutive nights with your points and more.
Strategies for earning and redeeming points
Deciding on a new travel credit card may be the hardest part, but the steps you take from there can dramatically impact how many rewards you earn and the value you get when you redeem. How do you earn more points and get more bang for your buck? Consider these tips:
How to earn more rewards
Pair a travel credit card with a cash back credit card in the same program. Some card combinations can help you earn more travel rewards, but you have to make sure the program you’re considering lets you pool all your points in one place. Rossman uses the example of the Chase Freedom Unlimited as a good card to pair with the Chase Sapphire Preferred since the Chase Freedom Unlimited also lets you earn bonus rewards on travel booked through Chase as well as bonus rewards on drugstore purchases and dining, as well as 1.5% back on all other purchases. This card combination can help you earn more rewards over time, and Chase lets you pool them all in your Preferred account for better travel redemptions like airline and hotel transfers or 25% more value through the Chase portal.
Pay as many bills as you can with your rewards credit card. Steele says you should think twice before using cash, checks or debit cards, as every purchase is an opportunity to earn more points or miles. For example, Steele says he uses a rewards credit card to pay for health insurance, car insurance and utility bills, as well as all other purchases he can cover with plastic.
Choose cards that offer exceptional rewards in everyday categories. Rossman suggests choosing cards that offer more points in categories you spend the most in, like groceries or gas. He recommends the Citi Premier® Card for that reason. Not only is this card currently offering 80,000 points when you spend $4,000 within three months of account opening, but it also earns 3X points at restaurants, gas stations, supermarkets, air travel and hotels, as well as 1X points on other purchases.
How to maximize value when you redeem
Avoid low-value redemptions. Steele says you should steer clear of redeeming valuable points for low-value awards like merchandise and gift cards. “Save your travel rewards for travel, and you’ll usually get far more value from them,” he says. As an example, American Express Membership Rewards points are only worth 0.7 cents each when you redeem them for purchases through Amazon.com or Best Buy, but they can easily be worth 2 cents each when transferred to airline partners.
Explore airline transfer partners and options. While it can be intimidating at first, make sure you explore some of the airline transfer partners you get with a flexible program like Chase Ultimate Rewards or American Express Membership Rewards. Frequent flyer programs tend to offer more value for each mile you redeem, and that’s especially true if you use miles for international airfare or a seat in a premium cabin.
“Price shop” among redemptions. If you focus on flexible rewards, you also get the chance to “shop around” among the options available to you. For example, you can compare the price for travel if you transfer points to an airline or hotel partner, then see how many points you would need to book the same travel through the program’s respective travel portal.
Be as flexible as you can. Finally, don’t forget the golden rule of maximizing travel rewards. Be as flexible as you can when it comes to your destination, dates and the way you redeem your rewards, and you’ll have the best shot at maximizing your rewards value over time.
What to watch out for
When it comes to avoiding the pitfalls of travel rewards, you should know you’re facing a minefield. The reality is far too many consumers dive into travel rewards without having a plan to pay off their purchases, and this is where they get in trouble.
After all, even a popular travel credit card like the Chase Sapphire Preferred offers 5x points on travel through the Chase portal, 3x points on dining, 2x points on other travel and 1x points on everything else, yet the variable APR you’ll pay falls between 15.99% and 22.99%. Rossman says that if you ever carry a balance, you need to worry a lot more about your interest rate than rewards.
Credit expert John Ulzheimer, who is formerly of FICO and Equifax, also says that travel rewards newcomers should be careful of the impact on their credit scores. That’s because credit scoring systems don’t differentiate between balances on rewards cards and other cards that don’t earn rewards.
“So, if you’re running up large balances on cards where you’re earning points and miles, you’re likely going to experience the same core problems as you would with any other style of credit card, he says.
For example, carrying a large balance on a travel credit card will cost you a boatload in interest, but it can also lead to high credit utilization, which makes up 30% of your FICO score.
Ulzheimer also says consumers should avoid constantly opening new rewards cards just for the sign-up bonuses, which can be tempting when you first get started.
“That will lower the average age of the accounts on your credit reports, which is more influential to your scores than you may think,” he says. “It will effectively cap your scores at significantly below the 850 top end of the score range.”
Finally, Rossman says people new to travel rewards should avoid the temptation of going directly after a premium travel credit card that comes with a $550 or $695 annual fee. These cards can be alluring due to the cardholder perks they offer like airport lounge access and travel credits, but you should get a handle on specific rewards programs and figure out your travel style before you dive in.