Traveling abroad is becoming easier and more accessible for everyone due to new technology and convenience of travel. People of all age groups, from college students embarking on a “gap year” to retirees looking to experience a new culture, are traveling bigger and better than ever. The one thing that everyone has in common, especially now after the holidays, is the desire to save and maximize their money. With many huge benefits and perks, the right travel credit card can really help you do this. But with so many options out there, what should you look for in a travel credit card?
Sign Up Costs
If you’re going on a trip, chances are you want to have as much liquid cash as possible. That means you don’t want to spend money upfront when it’s not necessary, like when signing up for a new credit card. While many credit cards offer free sign up, some require you to open a brokerage account with the company, and others may offer the first year for free, but will charge additional fees later. Other cards, such as the Visa® Black Card™, can cost $495 just to sign up! I generally recommend reading the fine print and signing up for cards that are either completely free or have the annual fee waived for the first twelve months. Just don’t forget to cancel after that free year! (And no, just because you cancel credit cards doesn’t necessarily make your credit score bad. I still have an excellent credit score due to on-time payments and a high average account age. If you’re going to cancel a card after the free year, just make sure you demonstrate responsible financial management to maintain a high credit score).
Note: Don’t let sign-up costs be an immediate deal-breaker. Southwest has a $99 annual fee but rewarded me with 50,000 bonus miles, which I redeemed for more than $600 of flights, so it was well worth the initial cost.
Many sign up rewards include an early spending bonus. This may be points or miles that are automatically added to your card for signing up, but can also be a reward for spending a certain amount within a few months of sign up. Depending on your situation and how much you travel, you can narrow down your search. If you have yet to buy expensive airline tickets or a tour package that you know will cost a certain amount, then it may pay off to go with one card even though it has a higher sign up fee if the spending bonus outweighs the cost.
An example of an early reward payoff is the Chase Sapphire Preferred® Card–by spending $4,000 in the first three months, Chase will add 50,000 points to your rewards balance. That can be redeemed for $625, which could cover (or at least put a healthy dent!) in plane ticket or hotel costs. If you would have spent that $4,000 anyway, the points earned in signing up are a great perk (hint: if you can put your rent or mortgage on a credit card, you’re golden!) Co-branded airline credit cards also usually provide incredible early rewards deals. Some of the ones I’ve taken advantage of:
- American Airlines Citi AAdvantage® Credit Card: $50,000 bonus miles after spending $3,000 in the first three months, and $95 annual fee waived for the first twelve months.
- Gold Delta Skymiles® Credit Card: 30,000 miles after spending $1000 in the first three months, and $95 annual fee waived for the first twelve months.
- Southwest Rapid Rewards® Credit Card: 50,000 miles after spending $2000 in the first three months, but $99 annual fee not waived.
Early rewards fluctuate though, and I actually activated each of the above cards when their sign up bonus was 50,000 miles. So keep an eye out and try to sign up when the bonus is the highest. Most of these cards also give 2 points per $1 spent on partner businesses, 1 point per $1 on other purchases, a free checked bag, and don’t charge foreign transaction fees, which is necessary for international travel.
Researching the spending rewards categories is very important, especially if you’re planning on using your card primarily for travel costs while on a trip, rather than everyday expenses. When traveling, you will most likely spend the most money on accommodation, transportation, and restaurants, while groceries and gas probably won’t be your top spenders. The Barclaycard Arrival™ World MasterCard® is a great option for anyone looking for a travel-specific card, as dining and travel booked through Barclaycard receive 2% rewards while other purchases earn 1% rewards. I also love my Bank of America Travel Rewards® card, which gives me 1.5 points per $1 on all purchases, redeemable for credit to book flights, hotels, cruises, rental cars, and more. I’ve found that redeeming points for travel credit usually saves me more money than another card with “cash back” rewards would.
You need to find a card that rewards in a category that you use most. Personally, my biggest expense is airfare, since I generally stay in hostels and either cook or eat local street food. So for me, the best rewards come from the co-branded airline credit cards. With all my sign-up bonus miles, I’ve flown from Los Angeles to Australia, from Thailand to Hawaii, from Hawaii to North Carolina, and many more long flights all for free, simply using miles that I gained from spending money that I would’ve spent anyways.
Rewards Rates and APR
The best advice I can give to anyone with a credit card is to pay the balance in full every month. But anyone who hasn’t followed that advice to a T knows that APR matters. Great rewards won’t matter if the APR rates are through the roof, because you’re essentially paying the credit card company via interest. If you have a tendency to let your balance stack up, read the fine print and make sure that the APR level isn’t a gouger. But again, the best practice is to avoid interest altogether and just pay the full balance every month!
Do you hate waiting to speak with someone in customer service? Or maybe foreign transaction fees are a concern to you? There are certain benefits like this that can vary from card to card. Some of these benefits include 24/7 customer service, no foreign transaction fees, free car rental insurance, checked baggage, and ATM transactions. Your particular style of travel will impact which of these perks are truly useful and which are window dressing, so it’s worth doing some digging to find what’s out there.
Ultimately, if you want to save some money while traveling, a travel credit card is essential. The “best” card for you depends on your individual spending patterns and travel style, so I can’t tell you which one to choose–I can only provide tips to help you figure it out. Know what you are going to spend money on, when you will spend it, and compare options to find a card that suits you. One of the resources that I find very helpful is The Simple Dollar, a website that compares each travel rewards credit card, explains how to use them effectively to maximize savings, and even allows you to sort and filter by benefits that matter most to you. You can filter cards by benefits such as no annual fee, no foreign transaction fee, great signup bonus, and more. There are a lot of travel credit cards out there, and many rewards for you to reap if you just do your research.
Good luck! And as always, keep on livin’ pura vida ✌