How do travel rewards work?

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Earning travel rewards with credit cards can help offset the cost of travel purchases and enhance your overall travel experience. Knowing how they work and how to use them are the keys to getting maximum value.

Here’s an in-depth look at the world of travel rewards, including how to earn them, redeem them and enjoy them.

What are travel rewards?

Travel rewards are benefits earned by spending money on eligible purchases with a travel credit card. Travel rewards come in the form of points or miles, and the more you spend with your travel card, the more rewards you collect. You can redeem your travel rewards for things like hotel stays, airfare and perks like airport lounge access.

Travel credit cards are best suited for those who frequently travel for leisure or business, since earning and redeeming rewards are primarily focused on travel.

How do points work?

With travel points, you earn a certain number of points for every dollar spent using your travel card. The amount of points you earn per dollar depends on the card and the purchase. A card might earn 2X points per $1 spent on airfare or hotels, for instance, while earning 1X points per $1 on all other eligible purchases.

Many points cards are co-branded hotel credit cards, which involve a partnership between a credit card issuer and a particular hotel chain. These cards typically earn a high rewards rate for booking hotel stays. One example is the Marriott Bonvoy Brilliant™ American Express® Card, which earns 6X Marriott Bonvoy points per $1 at participating Marriott Bonvoy Hotels. The card also earns 3X points at U.S. restaurants and on flights booked directly with airlines, as well as 2X points on all other eligible purchases.

An example of a non-branded points card is the Bank of America® Travel Rewards credit card, which earns an unlimited 1.5X points per $1 spent on all purchases, including non-travel purchases.

How do miles work?

Miles are a type of travel rewards offered by airline credit cards and some general-purpose travel cards. Much like points cards, a travel miles card earns miles for every dollar spent on eligible purchases.

The Southwest Rapid Rewards® Plus Credit Card is a co-branded card that earns 2X points per $1 on Southwest purchases and 1 point per $1 on all other purchases. An example of a non-branded miles card is the Discover it® Miles. You earn an unlimited 1.5X miles for every dollar spent on all purchases with the card.

How to redeem travel rewards

Redeeming travel rewards is typically a simple process, as many issuers have online portals. Knowing exactly how to redeem your rewards is a great way to get the most value out of what you’ve earned.

The basics

Your card issuer will typically have a portal on its website that lists redemption options and points values. Examples of redemption options include statement credits, travel purchases, gift cards and cash back. Rewards programs typically use a 1:1 conversion rate, meaning each point or mile is worth $1. However, your rewards could gain or lose some value depending on how you choose to redeem them.

Putting points and miles to work

The kind of card you have, and its respective rewards program, will determine how you can apply your rewards.

With some cards, you can redeem your rewards for statement credits to offset the cost of past travel expenses. Other cards offer the option to apply rewards to upcoming travel purchases such as airfare or hotel bookings. If you’re using miles to book airline tickets, for instance, you can typically redeem them during the booking process. The process is similar when applying points to a hotel booking.

Transferring points and miles

Some travel rewards cards let you transfer points or miles to the issuer’s travel partners, which may include airlines, hotels or cruise lines. If you choose the transfer option, be aware of conversion rates. The value of rewards transferred to a travel partner can fluctuate.

If it looks like you would lose value on a transfer, you’d probably be better off redeeming that batch of rewards for a statement credit.

Do travel rewards expire?

Depending on the issuer and the specific card that you have, your travel rewards do have the potential to expire, especially if you have a branded airline or hotel card. With these specific branded cards, the issuer will typically have an expiration date for your miles or points.

With most rewards or travel cards, your points or miles are less likely to have an expiration date, as many issuers have no-expiration policies on rewards. However, it’s a good idea to be aware of any possible expiration dates, just so your hard-earned points and miles don’t risk going unused.

How to maximize your travel rewards

Here are a few tips to help you get the most out of your travel rewards.

Take advantage of sign-up bonuses

Many travel cards come with the incentive of welcome offers or sign-up bonuses. These bonuses usually require new cardholders to spend a certain amount within the first few months of opening the account. Although these bonuses are often generous, make sure the spending requirement is realistic for your budget and travel plans.

Be aware of all fees before applying

Credit card fees don’t directly affect the rewards you earn, but the cost does affect a card’s overall value. Take note of all the fees associated with any card you’re interested in getting. Examples include:

  • Annual fees, which typically range from less than $100 to more than $500 with travel cards. If a travel card has an annual fee, you should be sure that the rewards and benefits will offset the cost.
  • Some credit cards charge a foreign transaction fee for overseas purchases—typically an extra 3 percent added to the total price. Although many credit card issuers offer cards with no foreign transaction fees, frequent overseas travelers should be on the lookout.

Make sure you have the right card

Especially with travel cards, it’s important to make sure you have the right card for your preferences. For example, if you’re partial to a certain airline or hotel chain, a co-branded card can offer higher rewards rates, discounts and perks.

You should also pay close attention to a travel card’s rewards categories. Earning points or miles at restaurants won’t offer a lot of benefit to someone who rarely dines out.

Learn more: Best credit cards for travel insurance

Written by
Hanneh Gundersen
Student loans reporter
Hanneh Gundersen specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand.