If you’re interested in investing in a travel credit card, it’s important to know the ins and outs before you commit to the one that’s right for you.
For many rewards credit card users, the opportunity to earn a free vacation is much more attractive than earning cash back or merchandise. Using travel rewards credit cards allows you to dream of spending relaxing days in beautiful places, rather than merely reducing the amount on your credit card statement balances by a percent or two.
What is a travel rewards credit card?
A travel rewards credit card is one that allows you to earn points or miles that can be redeemed for travel reservations. In addition to offering rewards, these credit cards are also more likely to offer other features and benefits that are valuable to frequent travelers.
Credit cards that offer travel rewards were some of the first rewards travel cards, and they have become very popular in recent years – there are now several different types of them. One of the most familiar kinds of travel reward cards are those co-branded by airlines, often called frequent flyer cards. These cards earn miles with a single airline’s loyalty program. Likewise, there are many hotel rewards cards that are co-branded with major hospitality chains.
Most credit card issuers also offer general purpose travel reward cards that earn points or miles in their own loyalty programs. Some of these card issuer created programs can allow you to redeem your rewards directly for travel reservations through their in-house travel agencies.
Other travel rewards programs let you redeem their points and miles for statement credits towards travel you book yourself. And several popular programs let you transfer your rewards to airline miles or hotel points, in addition to letting you book travel directly or offering statement credits towards travel reservations. There are also travel rewards credit cards designed for the needs of small business owners.
Types of travel credit cards
Airline credit cards are co-branded with an airline and offer both travel rewards and benefits when flying with that carrier. Standard rewards earned on airline cards is 2 miles (or rewards points) per dollar spent with the airline, and sometimes more in select bonus categories, and 1 mile per dollar spent elsewhere. Airline cards also offer perks such as priority boarding, discounts on in-flight food and beverages and a free checked bag.
Hotel credit cards are similarly co-branded, with a hotel chain in this case, and designed to reward purchases with that chain. Some offer enticing perks and bonuses, letting you earn points toward free night stays and benefits like room upgrades and late checkouts. Hotel credit cards differ from airline cards in that there’s no standard reward structure, so they’re a little harder to compare than airline cards.
General travel cards
Travel rewards credit cards not co-branded with a travel provider offer points or miles in a program created by the card issuer. Credit card users who earn these rewards redeem them directly with the card issuer for travel reservations – such as American Express Membership Rewards and Citi’s ThankYou points program – or transfer them to partner airlines and hotels. Flexibility is the key advantage of general travel rewards.
Premium travel cards
Luxury travel cards typically come with a high annual fee. But if you’re a frequent flyer who enjoys luxury perks, you can probably justify an annual fee of $200 or more. Most elite cards are loaded with valuable perks – airport lounge access, travel credits, luxury travel insurance, elite status benefits and luxury hotel perks – that can more than make up for those hefty annual fees, if used regularly.
How do you earn rewards with a travel credit card?
There are several ways you can earn points and miles with a travel rewards credit card.
First, most travel rewards credit cards offer new applicants the chance to earn a sign-up bonus. However, card issuers prefer to call these offers “new account bonuses” or “welcome offers.”
By any name, these offers allow new applicants to earn large amounts of valuable points or miles, usually after completing a minimum spending requirement. For example, a travel rewards credit card that’s co-branded with an airline might offer new applicants 50,000 miles after they use their card to make $4,000 of purchases within three months of account opening.
Points and miles
Beyond the new account bonuses, travel rewards cards offer points or miles for spending. Typically, a travel rewards credit card will offer a single point or mile per dollar spent on most purchases. But these cards will almost always offer additional bonus points for other purchases as well.
For example, airline and hotel cards will offer additional rewards for purchases from their brands, and many cards feature bonuses for common purchases such as dining, groceries and gas.
Ongoing bonuses and promotional offers
Many travel rewards credit cards will also feature bonuses and promotional offers for certain activities such as reaching an annual spending threshold, adding an additional cardholder or just renewing your card for another year.
Other benefits of travel credit cards
Beyond offering points and miles towards award travel, travel rewards credit cards can offer valuable cardholder benefits:
- Flight perks: Airline credit cards often come with perks such as priority boarding, discounts on inflight purchases and one or more free checked bags. Premium rewards cards with large annual fees may offer a membership in airport business lounges programs.
- Elite status: Hotel and airline reward cards can often get you elite status, entitling you to receive room upgrades, late checkouts and even free breakfasts.
- Travel insurance: Many travel rewards cards can offer travel insurance policies that cover rental cars theft and damage, trip delay/cancellation and lost luggage.
- Special deals: Many travel rewards credit cards also feature special deals. For example, an airline or hotel card can give you additional access to award flights and free night stays, beyond what’s offered to non-cardholders.
How to redeem travel points
Many general travel credit cards have their own, proprietary loyalty programs that issue reward points. When you’re ready to redeem your rewards with these programs, you have a range of options including cash back, gift cards, merchandise, travel reservations and charitable donations. Here are our guides for some of the most popular travel rewards programs:
- Chase Ultimate Rewards
- American Express Travel
- Citi ThankYou rewards
- Capital One Travel
- Bank of America Travel Center
To redeem airline miles, log into your frequent flyer miles account with the airline your card is associated with. The major carriers – American, Delta and United – often use pricing systems that correspond with the cash price of new reservations, making it harder to get good deals on domestic award flights. But they also allow you to redeem your miles on flights operated by foreign carriers, which can offer major value if you’re traveling internationally.
Other carriers, such as JetBlue and Southwest, have frequent flyer programs with more or less fixed values to their rewards. So you can redeem your rewards for any unsold seat, and the number of points required directly correlates with the price of the ticket. Most airline programs also offer options to redeem miles for other rewards, such as merchandise, gift cards, hotel reservations and rental cars – but non-travel options rarely offer as much value as award flights.
When it comes to redeeming hotel rewards, you’ll often receive the most value when using your points during peak travel season, when rooms are most expensive. But you may need to book award stays in advance to find available rooms.
What to watch out for
It’s also important to understand that award travel isn’t usually free.
First, the most compelling travel rewards cards have an annual fee, although some will waive that fee the first year. And if you choose to carry a balance on your credit card, the cost of the interest charges may exceed the value of the travel rewards you earn.
Since non-reward cards will offer lower interest rates than similar cards that offer travel rewards, it’s best to steer clear of travel rewards cards unless you avoid interest charges by paying your statement balance in full. Most travel rewards cards have eliminated foreign transaction fees, so that’s not the issue it once was.
Taxes and surcharges
When it comes time to redeem your rewards, there could also be taxes and fees that you must pay. For example, airlines impose taxes, fees and “carrier imposed surcharges” on many award tickets – including passenger fees mandated by the Transportation Security Administration (TSA). For domestic flights, it’s unlikely you’ll pay more than the $5.60 TSA surcharge, each way.
But for international flights, you could end up paying hundreds of dollars in government taxes and fees. In extreme cases, you may be asked to pay more than $1,000 in surcharges imposed by the airlines when you redeem your miles for an award ticket.
How to avoid unnecessary fees
When you’re able to redeem your points or miles directly for travel reservations or statement credits, you can avoid any cash payments. Also, you can typically avoid surcharges when you redeem hotel points, as taxes on lodging are typically tied to the dollar amount paid – meaning there are no taxes or fees on award stays. However, some hotels will impose so-called resort fees on award stays, while others waive those fees when paying with points.
There can also be fees on transferring points or miles from one person to another. But even when programs charge those fees, they can easily be avoided by simply booking travel reservations from one account in the name of another traveler.
Other fees to look out for include airline change and cancellation fees. Thankfully, most U.S. airlines reduced or eliminated these fees in the wake of the COVID-19 pandemic. When you cancel a hotel reservation within the cancellation period, often 48 hours before arrival, there’s typically no cancellation or change fee.
Travel rewards credit cards offer a way for you to earn exciting award reservations in return for opening a new account, using your card for spending and other activities. At the same time, these cards can provide you valuable perks and benefits, just for being a cardholder.
By understanding all the advantages, as well as the potential costs, you can decide if it makes sense for you to apply for a travel rewards credit card and which one is right for you.