A credit card is essential for travel. It is not a question of if you want one, but which one would serve you best.
Across much of the U.S. and Europe, cash is no longer the best way to pay for items or services. Aside from the hassle of exchanging one currency for another, it is not the best idea to carry a lot of cash.
Of course, you should not wholly forsake cash, as it is advised to always carry a small amount on you. However, significant transactions will usually be done with a card.
The incredible thing about travel credit cards is that they offer reward points. The right one can get you free flights, rooms, or even upgrades. There are hundreds of cards, and in the race to get more clients, they are always offering attractive incentives.
An important note for readers: Credit cards are always changing incentives and reward points to attract more customers. This article provides information about what certain cards are offering as of June, 2021. However, this information will likely change over time, and you may find what is listed in this article outdated. Always be sure to read the fine print before you sign up for any credit card.
Things to Keep in Mind When Choosing a Travel Credit Card
1. Co-Branded or General
No credit card is perfect. It is typically a matter of trade-offs.
If you want substantial rebates, a co-branded card is the best. Co-branded cards carry the name of a hotel chain, airline, or other business. You can get much higher reward points, but often with strings attached.
For instance, IHG Rewards Club Cards have no annual fee and provide 15X the reward points for nights spent at an IHG brand hotel.
On the other hand, a general card like Chase Sapphire Rewards gives you points more consistently during travel, regardless of where you spend. You are less tied to a brand, but will be required to pay annual fees.
It is almost impossible to locate a card which offers you the best of both worlds.
2. A Big Welcome Offer
After you have decided between a co-branded or general card, the next thing to focus on is the welcome offer.
Usually, this requires you to spend a certain amount of money within the first three months, and in return, you get a large amount of bonus points.
If you don’t have any large purchases planned, ask friends and family if they would like to use your card for buying a big-ticket item. This helps you get past the initial threshold.
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3. Added Category Points
It is simply not enough to earn only one point per dollar spent. The card should offer special categories that provide more.
For example, the American Express Gold Card offers 4X membership reward points at restaurants, including takeout and food delivery services. It also provides the same for shopping at U.S. supermarkets.
Users also earn 3X membership rewards points for flight bookings using amextravel.com, or by booking directly with airlines.
It is critical that you are able to earn more points than the dollars you spend. You should usually aim for rewards in the range of 3X to 5X points per dollar.
4. Low Minimum Spending
There is always a catch. Credit cards are, after all, a business. It is hardly possible that a bank would lend you money without some fine print.
You typically become eligible for all of the extra points when you spend several thousand dollars every year.
The card companies want you to spend more so that you are unable to pay it back within 30-45 days, thus causing interest to generate. This is how the credit card company makes money.
Look for cards with the lowest minimum spending threshold.
5. Annual Travel Credit
These are not points, but are a fixed amount credited to your account; essentially a direct discount. Chase Sapphire Reserve, for example, gives you $300 USD worth of annual travel credit every year.
American Express Platinum gives you $200 annually for travel by Uber, a $200 airline fee credit, and access to 1,300 airport lounges worldwide.
This helps offset your annual card fee almost entirely. But to receive these benefits, you have to travel regularly. Most travel cards also offer travel credits as “miles” to allow you to get free flights.
6. Annual Fees
Is it better to have more annual fees and perks, or fewer fees and no perks at all? If you are unsure about your travel itinerary, then you should consider using the latter.
The cheapest cards have an annual fee of $95. Few card brands, such as Capital One Venture and Blue Cash Everyday, have no fees. That certainly makes them attractive to many who are on a tight budget.
Premium cards typically have a fee of over $500 annually. While that might sound like an extremely large amount, those who use these cards travel more, and are able to earn back far more through rewards and perks.
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7. International Travel
There are a few big card companies like Visa, Mastercard, and Discover. These are the network payment processors. They don’t actually offer a card, but the card you carry will have a logo from one of them somewhere on the card.
Discover is not a global card. Of course, all of these cards claim they are accepted in 200 countries, but at the point of sale, it’s the merchant who determines what cards it will accept.
Other than these, American Express and Diners Club are also common. However, if you are traveling to Asia, don’t expect the local pharmacy to accept Diners Club. Big hotels and travel agents would, of course, take most any card, but only Visa and Mastercard are usually accepted everywhere.
It is crucial that the card has low processing fees for overseas transactions. Many banks tend to add 3% onto the expenses as processing charges. Look for a card that charges as low a fee as possible for overseas transactions.
Do You Have Poor Credit?
You have chosen the ideal card after endless hours of research. But alas, your application is rejected due to a poor credit score.
There is no way to instantly amend the score. The only action that you can do is to choose the card that is available and regularly make transactions using it.
Pay the dues every month, and in time your credit score will improve. This process is, however, long, drawn out, and might take several years. Never miss a card payment or default on the card.
There is another workaround. You could always apply for a secured credit card. This requires you to maintain a certain amount as a deposit with the bank. You are allowed to make purchases on the card that equal up to 80% of the amount you have deposited.
The deposit receives interest according to prevailing rates.
If this is impossible, try to get a family member to sign for you on a subsidiary or additional card. This could be another option for you to help establish credit. Not only do you have access to a card, but you also get to improve your low credit score.
Credit cards are like gloves. You have to try them out before you find the one that suits you best. Reading online reviews can only help so much.
If you can afford it, the best idea is to have one co-branded card and one general card. Many veteran travelers use even more than just two.
Some cards do offer certain travel benefits in case of a cancelled or interrupted trip. However, we also recommend purchasing travel medical insurance or travel insurance to help safeguard your finances against unexpected medical issues or travel mishaps abroad.
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