Travel credit cards: What they are and how they work
You have probably heard at least a few stories about people covering full-fledged vacations—and even luxury trips—with points earned from a travel credit card. While earning enough points or miles for a trip takes time and a lot of credit card spending, these stories are often 100 percent true.
The fact is, travel credit cards let users earn rewards points on spending and bills they charge. Once enough points are saved up, it’s totally feasible to cover airfare, hotels and other travel expenses entirely with credit card rewards. This is the case whether we’re talking about an over-the-top vacation in an overwater bungalow in the Maldives, an all-inclusive getaway or a quick road trip across the country.
When it comes to travel credit cards, your rewards are only limited by your imagination—and how much time you can get off work.
If you find the idea of “free travel,” or almost-free travel, intriguing, you’re probably wondering what the deal is with travel credit cards. Read on to learn about the different types of cards out there, how they work and what to look for when picking one for your wallet.
Travel credit card basics
Travel credit cards work similarly to other rewards credit cards. The difference is, consumers earn different types of travel currencies in the place of cash back or generic rewards points.
The key is finding a travel credit card that offers a rewards currency you can truly benefit from, whether that includes airline miles, hotel loyalty points or travel rewards points that can be used in more than one way.
Most travel credit cards offer bonus rewards on certain types of travel purchases, although bonus categories can also be outside the travel realm. Some travel credit cards also offer a slightly higher flat rate of points or miles on everything you buy, which can make your rewards game simple to oversee.
Types of travel credit cards
To find the right travel credit card for your needs and goals, you’ll first want to think about the type of travel rewards you want. The main types of travel credit cards include the following:
Airline credit cards
True to their name, airline credit cards are offered by credit card issuers and co-branded with airlines. This type of card doles out airline miles from a specific frequent flyer program, which can be redeemed for flights, upgrades to a premium cabin and other options depending on the program.
Some airline credit cards offer frequent flyer benefits like free checked bags, in-flight discounts, airport lounge access and priority boarding. Some well-known examples include the Southwest Rapid Rewards® Priority Credit Card and the Delta SkyMiles® Platinum American Express Card.
Hotel credit cards
Hotel credit cards are offered through card issuers and co-branded by hotel loyalty programs. As a result, they let you earn hotel loyalty points that can be redeemed for free hotel stays, room upgrades and other perks.
This type of card is geared toward individuals who stay in hotels for business or leisure on a regular basis and may come with perks like automatic elite hotel status, free award nights or annual hotel credits. Depending on where you regularly stay, you might consider the Hilton Honors American Express Card and the Marriott Bonvoy Brilliant™ American Express® Card
Flexible travel credit cards
Flexible travel credit cards have their own rewards programs that let you redeem your points in more than one way. For example, you may be able to redeem points for travel through a portal or for gift cards, merchandise or cash back.
The best flexible programs, including Chase Ultimate Rewards and American Express Membership Rewards, also let you transfer your points to airline and hotel partners. Popular choices in this category include the Chase Sapphire Preferred Card and the American Express® Gold Card.
Flat-rate travel credit cards
Flat-rate travel credit cards typically offer a flat rate of points or miles on all your purchases. From there, they let you redeem your rewards for travel at a flat rate, either through the use of statement credits or a travel portal. High-earning flat-rate travel cards include the Discover it® Miles and the Bank of America® Travel Rewards credit card
Premium travel credit cards
Finally, there are some travel credit cards that offer more perks and benefits than others. Cards in this niche tend to be flexible travel credit cards that let you transfer points to airline and hotels, yet they offer premium benefits like airport lounge access, annual travel credits, a fee credit for Global Entry or TSA PreCheck membership and more.
Premium travel cards charge annual fees that range from $395 all the way up to $695, but they can be well worth it for people who travel often. If you think you’ll make the most of the benefits, check out the Chase Sapphire Reserve and the Capital One Venture X Rewards Credit Card
Travel credit card perks and features
While the rewards you earn with a travel credit card are made to be redeemed for travel, travel cards can also stand out due to the perks they offer to travelers. The benefits of travel credit cards vary widely but may include the following:
- Credit card travel insurance: Many people choose their travel credit card based on the insurance benefits it offers. Credit card travel insurance may include primary auto rental insurance, trip cancellation and interruption insurance, trip delay coverage, lost luggage reimbursement and more.
- Airport lounge access: Many premium travel credit cards offer Priority Pass Select airport lounge membership or airline-specific lounge membership.
- Global Entry or TSA PreCheck: Some cards also offer a credit toward Global Entry or TSA PreCheck membership, which is usually good for up to $100 every four to five years.
- No foreign transaction fees: Travel credit cards tend to waive foreign transaction fees, which are often charged on purchases made abroad.
- Automatic elite status: Some travel credit cards, and particularly hotel credit cards, offer automatic elite status just for being a cardholder. A handful of premium travel credit cards also offer automatic elite status with rental car loyalty programs.
- Annual travel credits: Some cards in this niche offer annual travel credits, although eligible purchases that qualify for the credit can vary from card to card.
- Frequent flyer benefits: Airline credit cards often offer free checked bags, priority boarding, in-flight discounts and other perks that apply when you fly with the airline.
Getting a travel credit card: Pros and cons
Credit cards for travel can be hugely beneficial in more ways than one. However, the costs and redemption options associated with travel credit cards mean they won’t work for everyone. Potential advantages and disadvantages of travel credit cards are detailed below.
Pros of travel credit cards
- Chance for better rewards value: Flexible travel credit cards and airline credit cards offer the potential for superior redemptions worth 2 cents per point or more, although the value you’ll get out of each point or mile can vary widely.
- Qualify for free travel insurance: You just have to pay for your travel with your credit card to become eligible.
- Score elite travel perks: Many travel credit cards offer benefits that are worth hundreds of dollars on their own. For example, Priority Pass Select membership has a retail value of $429, and some cards offer annual travel credits worth up to $300.
- Rewards can be flexible: Some travel credit cards let you redeem your points in more than one way, including for travel through a portal, transfers to airline or hotel partners and more.
- Earn a generous sign-up bonus: Premium travel cards are known for offering credit card sign-up bonuses worth up to $1,000 or more if you redeem for travel.
- May help you earn elite status: Some travel credit cards give you automatic elite status just for being a cardholder. Others give you the chance to work toward elite status through credit card spending alone.
Cons of travel credit cards
- Annual fees can be high: Premium travel credit cards charge annual fees up to $695. While these fees can be well worth it if you travel often, they can still be hard to justify.
- Interest rates are high: Travel credit cards charge high APRs when you carry a balance, and they very rarely extend an introductory APR.
- Rewards can be inflexible: Particularly in the case of airline credit cards and hotel credit cards, rewards can be difficult to use for the exact redemptions you want.
- Poor redemption value for non-travel options: You may get less than one cent per point in value when you redeem for gift cards, merchandise and other non-travel options.
How to redeem points and miles
Before you decide to pick up a travel credit card, it helps to have a general understanding of how you can redeem your points. This is especially true since your rewards will work differently depending on the type of travel credit card you have:
- Airline miles are typically only redeemable for flights with a specific airline or their alliance partners. You may also be able to use airline miles for upgrades to a premium cabin, airport lounge access and a handful of other options.
- Hotel points are typically only usable for free nights at resorts within a hotel loyalty program’s portfolio, although you may be able to use points for room upgrades and other options.
- Flexible travel points, including points from premium travel credit cards, can be used for travel through a portal, transfers to airline and hotel loyalty programs or cash back, gift cards and merchandise.
- Fixed-value points can almost always be redeemed for statement credits at a rate of one cent per point. In some cases, rewards can only be redeemed for travel purchases charged to the card, yet you might also be able to redeem fixed-value points for regular purchases and bills.
Generally speaking, flexible travel points are the easiest to redeem since you can use them for statement credits, gift cards, merchandise or travel. You get the chance to earn points right away, and you can decide how to use them later on once you’re ready. Meanwhile, flexible points are also fairly easy to redeem since, most of the time, you can charge any travel purchase to your credit card and use your points to wipe out all or part of the cost.
By contrast, airline miles and hotel points are more difficult to use since you have to deal with specific loyalty program rules. Availability for awards can also be limited, especially for peak travel dates and popular redemptions.
With that in mind, it usually only makes sense to pursue airline miles or hotel points if you have a general idea of how you can use them. If you don’t know where or when you want to travel, or if you just want to decide later on, a flexible travel credit card or fixed-rate card is probably your best bet.
What to look for in a travel credit card
If you’re wondering about the best ways to choose a travel credit card, you need to think about the type of travel you enjoy and the perks you really want. The following questions are key as you look for the right card:
- Is it a general travel credit card or a co-branded card?
- What type of rewards will you actually use?
- Can you easily meet the spend requirement for the sign-up bonus?
- What travel perks do you truly want and need?
- Are you willing to pay an annual fee for supercharged benefits?
The bottom line
At the end of the day, travel credit cards can help you earn free hotel stays, premium flights to far-flung locations and complete vacation packages for your entire family—but it all starts with finding the right travel card for your needs. Ideally, you’ll find a card that offers rewards you want and perks you enjoy for a price that seems like a steal.