How do travel credit cards work?
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- 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 make it easy to earn rewards (usually offered in the form of points or miles) for certain types of purchases. You can usually redeem your travel rewards for things like 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, whereas others let you earn rewards within a credit card’s rewards program. At the end of the day, you’ll want to make sure you understand the type of travel rewards your card offers, as well as available redemption options before you sign 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 or flexible travel credit cards. As an example, some types of travel credit cards are co-branded with another program, whereas others are not.
Here’s more about how each type works:
Hotel credit cards
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 as well as 2X points on all other eligible purchases.
Airline credit cards
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 on restaurant, U.S. supermarket and 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 membership.
Flexible travel credit cards
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, including non-travel purchases, plus 3X points on Bank of America Travel Center 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.
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, 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.
Redeeming rewards by transferring to a travel partner
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.
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
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 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. 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. 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 help to significantly reduce the cost of your travel if the spending categories and redemption options align with your budget and spending habits. 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. By making strategic choices, you can start getting outsized value from your travel rewards year after year.