How to Choose the Travel Rewards Credit Card That's Best for You
Credit card rewards offer one of the fastest routes to free travel. Compared to traditional frequent flyer miles, where you can only achieve an eventual free flight by repeatedly buying airline tickets, a travel rewards credit card allows you to earn free travel by simply using your credit card on everyday purchases.
Just like a punch card from your local cafe, each purchase on a travel rewards card counts toward an eventual freebie, be it a flight, hotel stay, or African safari. However, with credit cards earning rewards isn’t quite as clear-cut as, say, buying 10 coffees and getting the 11th one for free.
There are dozens of travel rewards credit cards with differing types of rewards currencies and rules for how you can use them. As a result, choosing the right travel rewards card can be a bit perplexing. Taking the time to understand your options and picking the right rewards card is a worthwhile part of financial planning for travel. Use this guide to find out what card will earn you free travel as quickly as possible.
Determine Your Personal Travel Goals
Before trying to sift through all of the card options, analyze your personal travel aspirations because the “perfect” card completely depends on your personal travel goals. What do you want a travel rewards card to help you achieve? This answer is likely to be in flux from year to year, but think about your current intent. Do you have a destination in mind? Do you want free flights? A free hotel stay? Or, perhaps you want freebies in the form of museum tickets and Michelin star meals? Focusing on your goals will help you figure out what rewards currency you should focus on earning and thus what cards you should carry. Some rules of thumb to keep in mind:
First Class Airfare: If you want to score a business or first class ticket, you’ll want to collect airline miles, or transferrable points, such as American Express Membership Rewards points, Chase Ultimate Rewards points, or Citibank ThankYou Points, which can be converted into airline miles at a one-to-one rate.
High-End Hotels: If you want room and board at a bucket list bungalow, accrue hotel points or transferrable points, such as American Express Membership Rewards points, Chase Ultimate Rewards points, or Citibank ThankYou Points, which can be converted into hotel points.
Vacation Rentals: If you want a free stay at an Airbnb, vacation home, or villa, you need to rack up fixed-value points.
Adventure Travel: If you want your points to pay for road trips, camping, safaris, bike tours, scuba diving, skiing, or other non-traditional travel, you want to collect fixed-value points.
Business Travel: If you’re a frequent business traveler you’ll find the greatest value in both airline miles and hotel points.
Analyze Your Spending Habits
When you’re trying to identity the best travel rewards card, what you’re primarily looking for is the card that will get you free travel the fastest and for the least amount of credit card spend.
The key to this is taking advantage of category bonuses. Many cards offer bonus points for spending in certain categories, i.e. spending at grocery stores, or for meeting a certain spending requirement. This means that instead of earning the usual rate of one point or one mile for each dollar you spend, you can earn two, three, even five points or miles per dollar spent. Translation: you’re cutting the time until free travel in half or less.
As such, what card you should get largely depends on your personal spending habits. “Think about where you do most of your credit card spending – this is called your Earn Profile,” explains Sean McQuay of NerdWallet. “For most people it’s on groceries, gas, restaurants, and other everyday expenses. So, a card that offers an increased earn rate for every dollar you spend in these categories will help you earn free travel faster.”
Common bonus categories include:
- Drug stores
- Dining and restaurants
- Gas stations
- Commuter transportation
- Business supplies
Consider Getting More Than One Card
“I always stress the importance of diversification in your points and miles strategy. No single card is perfect and there is no perfect currency for every single desired redemption,” says Brian Kelly, founder of the The Points Guy. “Certain cards have certain strengths, so the best points strategy usually involves having a few different cards that together allow you to maximize your earning and burning potential.”
For example, you may want one card for your everyday spending that awards two to three times the bonus points for groceries and gas, and another for purchasing business airfare, which offers bonus points and perks such as free checked baggage and priority boarding.
Contrary to popular belief, applying for and carrying multiple credit cards does not hurt your credit score. As long as you pay off your balance in full each month, possessing multiple cards can actually help your credit score.
What’s In A Name?
A fair bit of confusion, usually. A single travel rewards card can bear multiple brand names and logos. Take, for example, the Citi / AAdvantage Platinum Select World Elite MasterCard. Don’t let this mouthful confuse you.
Let’s break down the anatomy of this card:
1. Citi refers to Citibank, which is the credit card issuer
2. MasterCard is the name of the payment processor
3. AAdvantage Miles is the rewards currency
4. The extra words Platinum, Select, and Elite are descriptive words used to make the card seem more appealing, but they refer to the name of the financial product and sometimes differentiate the benefits and rewards offered.
When sizing up a card, what you need to focus on is the rewards aspect of the card. In order to do so, it is helpful to understand the four main categories of travel rewards cards:
Airline Co-Branded Cards: These cards carry the name of an airline, such as in the above example, and when you use your credit card you earn miles specific to that airline.
Hotel Co-Branded Cards: These cards carry the name of a hotel chain, such as the Marriott Rewards Premier Card, and when you use your card you earn points specific to that hotel chain.
General Travel Cards: These cards are typically issued by a bank and are not linked with a specific airline or hotel company. You earn points that can be used across various airlines and hotel chains, as well as on other forms of travel.
Cash Back Cards: There are no points or miles – instead you receive a cash rebate on your purchases, which can later be used to pay off travel purchases.
So, in the above example, if you use the Citi / AAdvantage Platinum Select World Elite MasterCard, you'll earn American Airlines AAdvantage miles every time you make a purchase. Citibank and MasterCard aren’t providing the rewards in this case, they’re simply the financial service providers that facilitate transactions. If you never fly American Airlines or its Oneworld alliance partners, or if your hometown airport is a hub for a different airline, then the above card wouldn’t be a good choice for you since the rewards you’re earning can only be used to book on American or a partner airline (Japan Airlines, for example).
On the other hand, general travel rewards cards, such as the American Express Gold or Platinum, Chase Sapphire Preferred, and Citi ThankYou Premier, offer far more flexibility. Instead of earning frequent flyer miles, as in the above example, you earn bank-issued credit card points that are brand agnostic, meaning you can use them for any type of travel. With an American Express travel rewards card you earn American Express Membership Rewards points, with a Chase Sapphire card you earn Chase Ultimate Rewards points, and with a Citibank travel rewards card you earn ThankYou Points. More simply put: Amex points, Chase points, and Citi points, each of which has unique perks, partners, and redemption possibilities.
Card Currencies: Points vs. Miles
Some cards issue points and some issue miles. Before choosing a travel rewards credit card, it is important to understand the difference so you can determine which one will contribute most to your individual travel goals.
Let’s start by examining points, for which there are two main types: points that act like money and points that don’t act like money.
1. Points that act like money: The value of points is flexible and changes over time, but typically vary between one to two cents. For points valued at one cent, 10,000 will get you $100 of free travel. You simply pay for any type of travel using your travel rewards credit card and then cash in points to pay off your statement.
2. Points that don’t act like money: These points do not have a set monetary value. Instead, it is the redemption, such as a free hotel room, that has a set value. For example, one night at the 5-Star JW Marriott Phuket Resort & Spa in Thailand requires a fixed 40,000 Marriott Points.
Now let’s look at miles. Miles are also known as frequent flyer miles, the same miles you earn when you fly with a specific airline to accumulate mileage by using a frequent flyer number. With credit cards that earn miles, you earn frequent flyer miles, not points, and without ever setting foot on an airplane.
Airline miles are just like the Marriott hotel points in the above example, in that miles do not have a set monetary value. The ticket itself costs a fixed number of miles, a figure that varies depending on the route and the airline.
Despite these differences, the terms “points’” and “miles” are often used interchangeably. For example, the celebrity-endorsed Capital One Venture Rewards Credit Card advertises that members earn miles when they use their cards, but this is a bit misleading. Capital One has simply nicknamed their points as "miles." You do not earn airline miles with this card, you earn fixed-value points (the aforementioned points that act like money).
This isn’t an issue of semantics. The distinction is crucially important because you can book travel such as premium airfare with either points or miles, but depending on your travel goals there can be a clear answer as to which type of currency – points vs. miles – you should use and collect.
If your goal is a free business or first class ticket you should always collect miles – or transferrable points like American Express Membership Rewards that can be converted into miles – because it will require far less miles than points to book an identical itinerary. When it comes to miles, the redemption has a fixed-value, with each airline setting its own mileage requirements. Credit card points worth one cent each won’t get you very far (even if they’re nicknamed "miles"). To determine the going market value of points and miles, The Points Guy publishes a monthly valuation for every leading card program.
Miles and points typically are accrued at the same rate of 1 mile per dollar spent or 1 point per dollar spent, though, as mentioned above, some cards offer bonus points for spending in certain categories, such as airfare and hotel stays. For example, the American Express Platinum card rewards members with five points for every dollar spent on travel if it is booked directly with airlines or through American Express Travel. In the Dubai example above, collecting points to attain a goal of first class travel would require 11x the length of time and credit card spend than if you instead concentrated on earning miles.
While miles are the optimal choice for premium air travel, they are far less flexible and can only be used to book air travel with the airline that issued the miles (or one of the airline’s partners). Points, on the other hand, are much more versatile. They are brand agnostic, meaning you can book a flight with any airline, and you can use points to book travel other than airfare, such as hotels, Airbnbs, train tickets, rental cars, and tours.
Some general travel rewards credit cards have partnerships with airlines and hotels and allow you to convert your credit card points into hotel points or airline miles. For example, you can convert American Express Membership Rewards points – the currency you earn with the American Express Gold, Platinum, and EveryDay cards – into Delta, Air Canada, Air France, or other airline miles. Citi and Chase points have their own transfer partners.
“The value with transferrable points is flexibility,” explains Kelly. “If your goal is to collect miles, this is a way to collect miles without committing to a specific airline. And if you haven’t identified a travel goal, and thus whether you’d benefit more from collecting points or miles, a card that issues transferrable points allows you to leave your options open.”
The big picture: by identifying what rewards currency you want to concentrate on earning you can easily narrow in on the cards that issue your selected currency.
What About Cash Back Cards?
A cash back card is a lot like a fixed-value points card: instead of getting one point (worth one cent) for every dollar you spend, you simply get one cent back from every dollar you spend. You can then put these funds toward travel. Further, like points cards, cash back cards offer bonus earning rates, such as the 2 percent cash back Discover it Cashback Match and the 5 percent cash back Chase Freedom card.
“A cash back card can be the right choice if you prefer types of travel that you can’t usually pay for with miles or points, such as road trips or backcountry camping,” according to The Points Guy, Brian Kelly. “But, keep in mind that cash back and fixed value points are not the best way to get big travel with small money.”
Which is often the whole point of the points game.