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How Do Travel Credit Cards Work?

Travel Credit Cards

Travel credit cards can help you earn rewards and discounts that you can redeem for travel. In some cases, they may even offer you free nights at your favorite hotels or free tickets on airlines. From free upgrades to first-class seats, exclusive airport lounge access to free meals, these cards offer lots of benefits. You might also be interested in credit card churning for travel. Credit card churning involves repeatedly opening new credit cards to earn sign-up bonuses and special offers, then generally stopping using them.

Here are some important things to know about travel credit cards, along with the benefits that might interest you the most as you head to your dream destinations.

What Is a Travel Credit Card?

A travel credit card allows you to earn points or miles that can be redeemed for travel reservations. These credit cards are also more likely to offer other valuable perks for frequent travelers.

Credit cards offering travel rewards were among the first travel rewards cards, and they have become very popular in recent years. They now come in several different types. One of the most well-known types of travel credit cards is the airline card, often called a loyalty card. These cards allow you to earn miles with the frequent flyer program of a single airline. Likewise, there are many hotel rewards cards co-branded with major hotel chains.

Credit card companies also usually offer general travel cards that earn points in their loyalty programs. Some of these programs created by card issuers may allow you to redeem your rewards directly for travel bookings through their internal travel agencies.

Other travel rewards programs allow you to redeem their points and miles for statement credits for self-booked travel. Plus, many popular programs allow you to transfer your rewards into hotel points or airline miles.

What Are the Different Types of Travel Credit Cards?

Airline cards

Airline credit cards are co-branded with an airline and offer both travel rewards and benefits when you fly with that carrier. Standard rewards earned on airline cards are 2 reward points per dollar spent with the airline, and sometimes more in certain bonus categories, and 1 reward point per dollar spent elsewhere. The card can also come with additional benefits, such as priority boarding, free checked baggage, and in-flight food and beverage discounts. 

Generally, the higher the annual fee, the more built-in travel benefits you can expect from the card.

Hotel cards

Hotel credit cards are also co-branded, with a hotel chain in this case. You can redeem points for free hotel stays, room upgrades, or late check-outs. Your card may also come with benefits like a free night every year you own the card or automatic elite status in the hotel rewards program.

General cards

Flexibility is the main benefit of general travel credit cards. You can choose how you spend your rewards. You earn points for your everyday spending and bonus points for spending in specific categories. You can redeem your points for flights, hotel stays, vacation packages, rental cars, and more. Some of these cards also allow you to transfer your points directly to airline and hotel loyalty programs.

Flat-rate cards

Flat-rate travel credit cards are simple and easy to use. You’ll earn a certain number of points or miles with each purchase. It’s an easy way to earn rewards, as there are no spending categories to track. An example of a flat-rate card is the Business Advantage Travel Rewards World Mastercard credit card. This card will give you 1.5 points for every $1 you spend on all purchases, with no spending limit.

Premium travel cards

Premium travel cards offer premium benefits. They are designed for frequent travelers who want access to more benefits. They usually come with high annual fees but the benefits can be worth it. Plus, they can come with a higher rewards rate. If you’re a frequent flyer who appreciates luxury perks, you can probably justify an annual fee of $200 or more. Most elite cards give you several interesting perks, such as airport lounge access, travel credits, luxury travel insurance, and elite status perks. Those perks can more than compensate for the high annual fees if you use your card regularly.

How Do Travel Credit Card Points Work?

Cardholders accumulate points or miles until they’re ready to redeem them for rewards. Redemption options depend on the card you own. You can usually redeem travel credit card for flights, hotel stays, vacations, and more.

Many credit card issuers deposit miles or points directly into your account with the airline or hotel loyalty program. On the other hand, there are credit card issuers who have their own online shopping portal for travel rewards.

A few credit card issuers will allow you to transfer your points to partners, which may include other airlines, hotels, and car rental companies. In most cases, you start with the card issuer’s online portal to transfer these points. Once your points have been transferred to another loyalty account, you can book award travel directly through the hotel or airline loyalty program. You have generally more flexibility for redemptions for these types of points.

Some programs also allow you to redeem points and miles for gift cards, complimentary travel experiences, cashback, or a statement credit. However, these choices generally don’t offer the best value for your points.

Is A Travel Credit Card Worth It?

A travel credit card may be worth it, depending on how often you travel, whether you can afford to charge the card the amount required to qualify for rewards, whether you earn enough rewards to justify an annual and if you can pay the balance of the card on a monthly basis.

Travel rewards cards generally benefit people who travel often for work or leisure and can afford to charge enough to the required credit card to earn meaningful points or miles through one-time bonuses and ongoing rewards. Just be sure to pay attention to APR and fees. You can also compare incentive rewards from different issuers to determine if travel rewards credit cards are worth it based on your individual spending habits.

Featured Image: Megapixl

About the author: Stéphanie Bédard-Châteauneuf has over four years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on consumer stocks, cannabis stocks, tech stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.

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