30/11/2023

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Travel rewards credit card basics

5 min read
Travel rewards credit card basics

With the cost of travel continuing to rise thanks to inflation, savvy globetrotters are taking a closer look at their vacation budgets and looking for ways to save without sacrificing the experience that makes travel so special. More than half of travelers expect to spend more on travel this year than last year, with the average  consumer expecting to drop about $3,300 on trips in 2023, according to a recent RetailMeNot survey.

One of the most effective ways to cut the costs on a trip is by making the most of travel rewards credit cards. In addition to paying valuable rewards that you can redeem for flights and hotel stays, many travel credit cards make it easier for you to earn status with airline and hotel loyalty programs. They may even have other valuable travel perks like free checked bags or airport lounge access. Here’s what you need to know.

How travel credit cards work

Travel credit cards work just like other types of rewards cards. You earn rewards points for spending certain amounts in certain categories, and you can trade those points in for airline miles or use them to book hotel stays or buy vacation packages. Typically, travel credit cards pay the highest rewards for travel-related categories such as flights, hotel stays, dining out, and other experiences, although you’ll earn some rewards on other purchases as well.

Different types of travel rewards

Every travel rewards card is a bit different, but in general, these cards come in three flavors:

  • Hotel cards: Co-branded with hotel chains, these cards connect to your loyalty programs with those hotels, and their rewards points typically have the most value when you trade them in for hotel stays.
  • Airline cards: Airline cards work much like the hotel cards described above, but they’re co-branded with an airline. These may be a good choice if you live in a city that’s a regional hub for a specific airline, or if you prefer to travel with a certain airline over others.
  • General travel rewards cards: General travel rewards cards offer valuable rewards for travel-related expenses, but they’re not tied to a specific brand of hotel or airline. The Chase Sapphire Preferred® Card, for example, pays five times the points on travel purchased through Chase Ultimate Rewards®, three times the points on dining and two times the points on all other travel purchases.
  • Business travel cards. If you’re a freelancer or small business owner, you might qualify for a business travel rewards card, which can help your company earn rewards and lower the cost of business travel. The Hilton Honors American Express Business Card, which has an annual fee of $95, pays 12 times rewards for purchases made with your card directly at any Hilton portfolio hotel or resort, and six times rewards at U.S. gas stations, on U.S. purchases for shipping and on wireless telephone services purchased directly from U.S. service providers (see The Hilton Honors American Express Business Card – Rates & Fees; terms apply). The points can be used to book things like Hilton hotel stays, rental cars and Lyft cars, or used to shop in the Hilton portal or on Amazon.com.

Benefits of travel cards

The chief benefit of travel reward credit cards is that you can earn rewards to put toward traveling while spending money on travel (and in other areas). However, travel rewards cards also have other travel-related perks, including travel insurance, priority boarding on flights, and room upgrades.

The Capital One Venture Rewards Credit Card, for example, includes a credit for up to $100 that cardholders can put toward Global Entry or TSA PreCheck clearance and two visits a year to airport lounges.

Many travel cards also have no foreign transaction fees, making international travel less expensive, and offer support when you face situations like lost luggage or a flight cancellation.

“These benefits vary from card to card, but they’re hugely impactful, especially if you find yourself in a bind while traveling,” says Tori Dunlap, author of Financial Feminist.

How to use your rewards

The easiest way to use travel credit card rewards is by logging into your card’s rewards portal online. From there, you can search for flights or other trip expenses and cash in your points in exchange for those purchases. Alternatively, you can transfer some travel card rewards to other loyalty programs, such as an airline frequent flier program, to boost your status or balance in those programs.

“That’s an extra step, but it can be more effective since the points are often worth more,” Dunlap says.

What to look for in a travel rewards card

The best travel rewards card for you will depend on several factors, including how often you travel with specific airline or hotel brands.

“If there’s an airline that’s tied to your home city or that goes to most of the places you end up, or a hotel where you often stay because your employer has a preferential rate with that brand, you might take that into consideration,” says Bobbi Rebell, founder of Financial Wellness Strategies and author of Launching Financial Grownups. “You don’t want to spread out your points. You want them to be consolidated, so that you can get the most leverage from them.”

If you’re not loyal to a specific company, a more general travel rewards card could be a smarter choice. The Citi Premier® Card offers three times the points for every $1 spent on air travel, hotels, restaurants and gas stations (not to mention supermarkets) but also rewards everyday purchases with one times the points for every $1 spent on anything else. (You can also earn up to 60,000 ThankYou points for spending $4,000 within three months of opening the card.)

Pitfalls to avoid

As with any rewards card, the benefits of a travel rewards card are not worth more than the cost of interest, especially during times of rising interest rates. For that reason, if you carry a balance on your credit cards, you should focus on paying it down as quickly as possible, rather than continuing to spend to earn rewards.

Bottom line

If you travel frequently and consistently pay off your credit card balance in full, a travel rewards credit card can be a great way to reduce your costs and earn other perks along the way.

Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.

This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at [email protected].

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