If you’re new or relatively inexperienced when it comes to using travel credit cards to help enable you to travel more – you’re in the right place! By planning your travel and expenses well in advance, it enables you to save hundreds to thousands of dollars. That difference might make all of the difference, and if you’re not using travel credit cards and you travel, you’re missing out! In this post you will learn the two main categories of travel related credit cards, and how they work (and how to make them work for you)
Two Main Categories of Travel Related Credit Cards
1) Airline & Hotel Associated Credit Cards
These are credit cards from airlines and hotels that award you miles or points based on dollars spent. Typically, you will see around 1 miles/point per everyday purchase, but 2-3x miles/points for purchases with that brand.
As you can see from the above, I’ve found that the vast majority of my milage accrual has come from using credit cards vs. milage from actual travel.
Frequent flyers would likely have a different picture, but if you travel a few times a year like me, chances are you could be earning a lot more miles if you effectively used a travel credit card.
Main Pro:
– if you travel frequently with a select airline or hotel group, you can get (almost) free flights and nights
– if you pick your timing well, you can get a better value for the miles than with a travel credit. More on this here.
Main Con:
– you are locked into using brands within their network, which may or may not align with your nearest airport, cheaply priced destinations etc
2) Travel Credit Cards
These credit cards are typically issued by banks like Barclays, and are a similar program to cash back, except that it is for travel related expenses only. This may not sound terribly enticing, but when I signed up for this card there was a 70,000 point sign up bonus, which works out to be worth $700!
The way it works is that:
– you pay for an approved travel related expense like airfare or hotel
** (be sure to read the fine print here)
– after the expense posts on your credit card statement
– simply redeem the points you have available to reduce your credit card bill before you need to pay for it.
How to Make Travel Credit Cards Work For You
Let’s dive in a bit more to see how to make your credit cards work for you and help give you a let up in the process.
What do I need to know before I sign up?
The first question to ask yourself is can you comfortably make the minimum spend requirement for the sign up bonus?
You can be smart and plan to sign up for a new card just before you have some large planned expenses (annual auto/home/life insurance renewal, ski pass, home improvements etc), but don’t push it too much.
The second question to ask is will you be able to get more value from the card than the annual fee? It can pay to think out a couple of years. Say you’re planning a trip to Italy, but won’t be able to go for two years. If the annual fee on the card is $90, you would want to see more than $180 in value before going.
How much do I need to spend to see value?
The first hurdle as mentioned above is the minimum spend, so let’s start there.
Spending Example
– Let’s say you spend $1,500/month on your credit card and
– travel 1-2 times a year (one larger trip, one smaller trip)
Based on the above, you should be able to meet a $3,000 minimum spend in the first 90 days with ease, but a $5,000 minimum spend would require a little extra planning.
The next hurdle is the annual fee. If you are only traveling 1-2 times per year, then is it really worth it?
Well, if your annual fee that costs say $90/year, you would need to see:
– $90 or more value in Year 1
– $180 or more value by Year 2
– $270 or more value by Year 3
Whether you will be able to actually realize that much value will depend largely on how you plan and how you use your miles. So, let’s take a look at that in a bit more detail.
How to Use Your Miles
Let’s take a look at two examples to see which scenarios gives the most value.
Scenario 1 – Domestic Trip to Las Vegas
– Est. flight cost = $350
– Est. cost in miles = 30,000
– Value per mile = $0.011
Scenario 2 – International Trip to Paris
– Est. flight cost = $1,200
– Est. cost in miles = 75,000
– Value per mile = $0.016
Let’s look at the above scenarios through two different perspectives to judge which is our best option.
Perspective 1 – Value Per Mile/Point
This is straight forward. When searching for flights or hotel room value per mile/point you can find out what the value per mile/point is by using the below simple formula.
$ Expense if you paid cash / Miles required if you used miles
So, $100 flight / 10,000 miles = $0.01 per mile value
By researching and having a feel for the value of a mile/point is, you can know whether you’re getting a good deal or not. Depending on the season, seat availability etc, this can vary drastically so be sure to do your research in advance.
Perspective 2 – Total Savings
In our above examples, we have a better value for miles in the trip to Paris, but we are also saving quite a bit more money (you still have to pay taxes & fees out of pocket, so this is another area worth investigating).
Especially if you only travel infrequently, it can be worth it to save up your miles/points so that your entire airfare or hotel stay is covered.
Which Perspective to Prioritize?
It will depend on your situation, but my advice would be:
– If you plan on traveling more than once a year, keep a close eye on the value per mile metric. You will have more opportunities to utilize your miles and can get the best value by only using your miles when the offer the best value.
– If you are only planning on traveling once every few years, keep a close eye on the total value. The reason being, if you’re in this camp and cost is a consideration in the frequency of trips, then it’s not so much about which trip, but whether you’re able to go at all. Therefore, I think it is better to put the emphasis on making it possible for you to go by removing a large expense like airfare (especially on long international flights).
How many cards should I use?
If you’re like me, you would love to be able to get your trip cost to as close to $0 as possible, while still having the time of your life and not compromising on anything. While possible, you would need a TON of miles and points to make that happen and might only be traveling once a decade. Not ideal.
My simple run of thumb is
– Get as many cards as it makes sense financially & practically
You need to be able to manage your finances and not to forget to pay a bill. For some people that might mean 1-3 cards, while for others they could stay on top of 10+.
When you start dealing with annual fees though, now you have to make sure that you are in indeed getting ahead and aren’t over engineering your travel planning. For me, there are three travel cards that I have, but realistically only frequently use two for day-to-day purchases.
Whatever your decision though, taking the time to research the best travel card/s for you and then actually go on a trip can be very rewarding! Just keep in mind that you don’t overdo it and add them a bit at a time.
Now that you know more about the two main categories of travel related credit cards, how do you plan on incorporating them into your travel planning?
