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How do travel credit cards work?

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Many issuers shifted their rewards structures in 2020 and 2021 to focus more on rewarding cardholders for everyday purchases like groceries and takeout. Like other rewards cards, travel credit cards allow you to earn rewards for certain types of purchases, usually in the form of points or miles.

You can redeem your travel rewards for things like flights, hotels or other travel purchases like car rentals or vacation packages. Some issuers also let you redeem travel rewards for statement credits and other non-travel-related options.

Even in the pandemic, travel credit cards and their often lucrative rewards structures remain one of the most popular types of rewards cards. Becoming a savvy travel rewards cardholder can help offset the cost of travel purchases and enhance your overall travel experience. But first, you may wonder: How do travel credit cards work, and how can you earn and redeem rewards?

How to earn points and miles

You can earn travel points and miles for all purchases you make with your travel rewards card. While some rewards cards come with a flat rewards rate for all purchases, many cards include enhanced rewards for specific types of category purchases you make with your card. For example, while you can earn 1X points or miles on all purchases, you could rack up more on select category purchases like 3X points or miles on travel purchases and 2X points or miles on grocery store and gas station purchases.

How do travel 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. For example, a card might earn 3 points per dollar spent on airfare or hotels, while earning 1 point per dollar on all other eligible purchases.

Co-branded vs. non-branded points cards

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.

For example, the Marriott Bonvoy Brilliant™ American Express® Card earns 6 Marriott Bonvoy points for each dollar of eligible purchases at hotels participating in the Marriott Bonvoy program. 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 1.5 points per dollar spent on all purchases, including non-travel purchases.

How do credit card miles work?

Airline credit cards (and some general-purpose travel cards) usually offer rewards in the form of miles. Much like points cards, a travel miles card earns miles for every dollar spent on eligible purchases. For example, a card might earn 3 miles per dollar on travel purchases, 2 miles per dollar on grocery store and restaurant purchases and 1 mile per dollar on all other purchases.

Co-branded vs. non-branded miles cards

An example of a co-branded miles card is the Delta SkyMiles® Gold American Express Card, which earns 2X miles on restaurant, U.S. supermarket and Delta purchases and 1X miles on all other purchases.

As an example of a non-branded miles card, the Capital One Venture X Rewards Credit Card earns 10X miles on hotel and rental cars through Capital One Travel, 5X miles on flights through Capital One Travel and 2X miles on all other purchases. An example of a non-branded flat-rate miles card is the Discover it® Miles, where you’ll earn an unlimited 1.5X miles on all purchases.

How to redeem points and miles

The kind of travel card you have and its respective rewards program will determine how you can apply your rewards. Redeeming travel points and miles is typically a simple process, as many issuers have online portals. The two primary ways to redeem your points or miles are through an issuer’s online portal or by transferring your points or miles to an issuer’s travel partner.

Redeeming rewards on an issuer’s online portal

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 every 100 points or miles is worth $1. However, your rewards could gain or lose some value depending on how you redeem them. Some issuers, like Chase, offer boosted points value or other perks for travel purchases made through their online portal.

To redeem your rewards on an issuer’s online portal, simply log in to your account and locate the appropriate rewards or travel section.

Redeeming rewards by transferring to a travel partner

Some travel rewards cards let you transfer points or miles to an issuer’s travel partners, which may include airlines, hotels or cruise lines. If you choose the transfer option, be aware of conversion rates, as 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 through an issuer’s online portal for a statement credit.

To redeem rewards by transferring to a travel partner, you should be able to directly transfer your rewards to an eligible partner through the issuer’s online portal. Points or miles are typically transferred immediately, but sometimes it can take longer. Note, once you transfer points or miles from an issuer to a travel partner, you won’t be able to transfer them back to the issuer.

For example, Chase’s travel credit cards allow you to transfer Chase Ultimate Rewards points to one of their travel partners at a 1:1 ratio, but you may be able to squeeze even more value out of your rewards. Some of Chase’s travel partners include British Airways, JetBlue and Marriott Bonvoy.

Other ways to redeem points and miles

If you don’t want to redeem your rewards for travel purchases, you may be able to redeem them for a statement credit, cash back, gift cards or merchandise. Explore your travel card account and see what your specific issuer offers.

Best redemption option for maximizing value

Typically, the best way to redeem points or miles is to transfer your rewards to one of the issuer’s airline or hotel partners. But if you really want to get the most bang for your buck, consider redeeming your points or miles for a flight—particularly if you have a big vacation coming up.

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 generous sign-up bonuses. These welcome offers usually require you to spend a certain amount within the first few months of opening the account. Although these bonuses are often an attractive incentive to apply for a card, 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 of the fees affects a card’s overall value to you. Take note of all the fees associated with any card you’re interested in getting.

Annual fees

Not all travel cards come with an annual fee, but those that do typically range from $95 to over $500. If you’re interested in a travel card that has an annual fee, be sure that the rewards and benefits will offset the cost.

Foreign transaction fees

Some credit cards charge a foreign transaction fee for overseas purchases. This fee is usually around 3 percent of a purchase, and you’ll pay this fee for every transaction. If you travel abroad frequently, you should consider getting a credit card with no foreign transaction fees.

Make sure you have the right card

It’s important to find the right travel card for your needs. 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.

Additionally, pay attention to a travel card’s rewards categories. For example, earning points or miles at restaurants won’t deliver a lot of value if you rarely dine out. But if you use services like Lyft or Uber a lot, you may want to look into a card that offers points or miles for rideshares.

The bottom line

A travel credit card can help to significantly reduce the cost of your travel if the spending categories and redemption options align with your budget and habits. A large part of learning how travel credit cards work is simply knowing how to earn and redeem rewards in order to get the most value out of your card.

Be sure to pick a travel credit card that will reward you for the type of purchases you make most often. Ideally, it won’t charge a fee that costs more than you’ll earn in rewards. By making strategic choices, you’ll get the maximum value from your travel card.

Written by
Hanneh Bareham
Student loans reporter
Hanneh Bareham 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.
Edited by
Editor, Product
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Part of  Introduction to Travel Credit Cards