How do travel credit cards work?

Credit Cards

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10 min read Published October 12, 2023

Written by

Hanneh Bareham

and

Holly D. Johnson

Edited by

Angelica Leicht

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Key takeaways

Travel credit cards come in all shapes and sizes, from co-branded hotel or airline cards to general travel cards that allow points and miles transfers to partner brands
In terms of redemption, you’ll typically get the most value by redeeming toward travel in your issuer’s portal or transferring points
Before applying for a travel card, consider its fees, ongoing rewards structure and first-year welcome bonus opportunity

Travel credit cards offer a number of unique benefits to cardholders. For starters, they make it easy to earn travel rewards (usually offered in the form of points or miles) on certain types of purchases, which can be redeemed for flights, hotels, car rentals and vacation packages. Some issuers also let you redeem travel rewards for statement credits and other non-travel options.

Certain kinds of travel credit cards are associated with a specific airline or hotel loyalty program, while others let you earn rewards within a credit card’s rewards program. But given that rewards programs can vary, make sure you understand the type of travel rewards your card offers, as well as the redemption options available to you, prior to signing up.

Regardless of which type of card you choose, becoming a savvy travel rewards credit card holder can help offset travel costs and even enhance your overall travel experience.

Types of travel credit cards

The most common types of top travel credit cards are hotel credit cards, airline credit cards and flexible travel credit cards. Some travel credit cards are co-branded with another program, whereas others are not.

Co-branded hotel credit cards 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, and the points you earn can be redeemed for hotel stays, room upgrades and other hotel-related perks.

For example, the Marriott Bonvoy Brilliant® American Express® Card earns 6X Marriott Bonvoy points on eligible purchases at hotels participating in the Marriott Bonvoy® program, 3X points at restaurants worldwide and on flights booked directly with airlines and 2X points on all other eligible purchases.

Also note that many hotel credit cards offer automatic elite status (even the lowest tier), as well as perks like early check-in, late check out or free anniversary nights for cardholders.
Airline credit cards are also considered co-branded since they let you earn rewards within a specific frequent flyer program. An example of a co-branded miles card is the Delta SkyMiles® Gold American Express Card, which earns 2X miles at restaurants, U.S. supermarkets and on Delta purchases and 1X miles on all other purchases.

When you sign up for a co-branded airline credit card, you can redeem your miles for flights, cabin upgrades and other airfare-related purchases, like lounge visits. Another benefit of airline credit cards is the fact that many offer benefits like free checked bags and priority boarding. These perks can make having an airline card well worth it if you fly with a specific carrier more than once per year.
There are also flexible travel cards that generally offer a wider range of options. These cards typically let you redeem your rewards for travel through a portal or transfer points to an array of partner airline and hotel programs. Flexible travel credit cards can also come with some pretty nice benefits, which may include broad airport lounge access or travel insurance protections.

The best examples of flexible programs include American Express Membership Rewards, Capital One miles and Chase Ultimate Rewards, all of which have their own selection of cards for consumers and businesses.

One example of a flexible card is the Capital One Venture X Rewards Credit Card, which 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. Another is the Discover it® Miles, which gives you an unlimited 1.5X miles on all purchases with no annual fee.

A final example of a flexible travel credit card is the Bank of America® Travel Rewards credit card, which earns an unlimited 1.5X points on all purchases made with the card, including non-travel 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. 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.

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, also offer boosted points values or other perks for travel purchases made through their online portal. With this in mind, it can help to know how much points and miles are worth in any given program before you start earning or brainstorming ways to redeem your points. Bankrate offers a points and miles valuations page that takes an in-depth look at airline, hotel and credit card program rewards values.

To redeem your rewards on an issuer’s online portal, simply log in to your account and locate the appropriate rewards or travel section.
Some travel rewards cards let you transfer points or miles to the issuer’s travel partners, which may include frequent flyer programs or hotel loyalty programs. 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 travel partners at a 1:1 ratio, which can help you get excellent value when you go to redeem. Popular Chase transfer partners include British Airways, JetBlue, Marriott Bonvoy and Southwest Rapid Rewards, among others.
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 and what the redemption value is.

That last part is important since some travel card issuers give you less than one cent per point in value if you redeem for something other than airfare. As an example, American Express only gives cardholders 0.7 cents per point for prepaid hotels, cruises and car rentals booked through Amex, 0.6 cents for statement credits and 0.7 cents per point when using rewards to pay for purchases at checkout.

Best redemption options for maximizing value

Now that you know how travel credit cards work and the different redemption options that are out there, it’s smart to get an idea of how much value you can get from different types of travel rewards bookings.

Typically, the best way to redeem points or miles is to transfer your rewards to one of the issuer’s airline or hotel partners. 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.

Keep in mind that the examples below are general in nature, and you may be able to get more or less value for your rewards depending on how you use them for travel.

Card Name	How to Earn Rewards	Example Redemption Method	Bankrate’s Valuation
Chase Sapphire Preferred® Card	3X points on dining (including eligible delivery services), select streaming services and online grocery purchases (excluding Walmart, Target and wholesale clubs) 5X points on travel through Chase Ultimate Rewards and Lyft Rides (Lyft offer through March 31, 2025) 2X points on other travel 1X points on other purchases	Redeeming points for airfare or hotels through Chase	Considering the Chase Sapphire Preferred gives users 25 percent more value when they redeem points for travel through the Chase portal, this is a very good redemption. Essentially, cardholders get 1.25 cents per point redeemed with this option.
Capital One Venture Rewards Credit Card	5X miles on hotels and rental cars booked through Capital One Travel 2X miles on all other purchases	Transferring miles to Air France / Flying Blue to book international airfare	Since our internal point valuations show Capital One miles are worth around 1.7 cents each when transferred to its best airline partners, this is an excellent redemption option.
The Platinum Card® from American Express	5X points on up to $500,000 spent on directly-booked airfare and flights and prepaid hotels booked through American Express Travel (per calendar year) 2X points on prepaid car rentals through American Express Travel 1X points on all other purchases	Redeeming points for airfare through AmexTravel.com	Since this card only gives you 1 cent per point in value when you redeem points for travel through Amex, this is a subpar redemption. In many cases, the cardholder would be better off transferring their points to Amex partners to book airfare instead. In fact, our internal valuations show that Amex points can be worth around 2.0 cents each when transferred to top partners.
Capital One Venture X Rewards Credit Card	10X miles on hotel and rental cars booked through Capital One Travel 5X miles on flights through Capital One Travel 2X miles on all other purchases	Redeeming points for airfare through Capital One Travel	This is another card that only gives you 1 cent per point in value when you redeem points for travel through Capital One, which can make it a subpar redemption. In many cases, the cardholder would be better off transferring their points to Capital One partners to book airfare instead.
Discover it® Miles	1.5X miles for each dollar spent	Redeeming for statement credits to cover travel purchases	You’ll get 1 cent per point in value for this type of redemption, which is the maximum value you can get for any travel awards with this card.
Chase Sapphire Reserve®	3X points on general travel and restaurant purchases 10X points on Lyft purchases (through March 2025) 10X points on Chase Dining purchases through Ultimate Rewards 10X points on hotel stays and car rentals through Ultimate Rewards 5X points on air travel through Ultimate Rewards 1X points on all other purchases *Travel rewards kick in after earning the $300 travel credit	Redeeming for airfare through the Chase travel portal	The Chase Sapphire Reserve gives cardholders 50% more value for their points when they redeem them directly for travel through Chase, so this redemption gets you 1.5 cents per point in value.

How to maximize your travel rewards

Whether you’re trying to get the best possible redemption value or want to know which pitfalls to avoid, 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 that 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 before you choose a travel credit card. You don’t want to end up in debt for the sake of earning extra rewards.

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.

One of the biggest fees to watch out for with travel credit cards is the annual fee some of them charge. Not all travel cards come with an annual fee, but those that do typically range from $95 to $695. If you’re interested in a travel card that has an annual fee, be sure that the rewards and benefits will offset the cost. Otherwise, consider our list of the best travel credit cards with no annual fee.

Watch out for 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 you make overseas. 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, which you can do after comparing options and considering all their pros and cons. 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 significantly reduce the cost of your travel if the spending categories and redemption options align with your budget and goals. With that in mind, a large part of learning how travel credit cards work is simply knowing how to earn and redeem rewards in order to extract maximum value.

To make sure a travel credit card is ultimately worth it for you, be sure to select a card that rewards 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.

Also check out Bankrate’s travel toolkit to explore all the additional resources we have that can help you find the right card and maximize your rewards. By making strategic choices, you can start getting outsized value from your travel rewards year after year.