Credit cards are omnipresent in modern day society. People use them to pay for everything from cars to groceries to sticks of gum. The US is a credit card loving country and you’ve probably seen all the ads for bonuses if you sign up with this or that credit card be advertised by some celebrity. With so many cards to choose from, it’s hard to know which one is actually good for travel and which one is total BS.
Travel credit cards offer a great opportunity to earn free points that can be redeemed for airfares, hotels or cold hard cash. In the race to get customers, credit card issuing companies partner with various travel brands (or just simply offer their own card) that entice consumers with sign up bonuses, loyalty points, special discounts, and more. Their desire to get you, the consumer, is really your gain. By milking the system, you can get tons of free air tickets, hotel rooms, vacations, and even cash back.
I’ve accumulated close to one million points through sign-up bonuses alone. I use so many points each year; it would take an entire book to just list them off to you. I am cash poor, miles rich man!
All those points and miles have allowed me to travel the world on the cheap. And they can do that for you too, which is why signing up for a travel credit card is so important. It’s your gateway to free travel.
So how do you pick the best travel related credit card?
First, know that there is no perfect travel card – they all offer different benefits that fit different people. I use an AMEX card for booking flights (3x per dollar spent), Chase Sapphire for my everyday spending (and sometimes a Starwood card), and a different card for my business! But I have friends who only want cash back and others who only want United miles. So first know there is no one perfect card – there is only the perfect card for YOU!
What to Look for in a Travel Rewards Card
A huge sign-up bonus — A big sign-up bonus (after you meet the minimum spending requirement) is what jump-starts your mileage account and gets you close to a free flight (sometimes these bonuses even get you a few free flights!). Don’t sign up for a card unless it offers a high sign-up bonus.
Bonuses work like this: in order to get the large bonuses, you must make either a single purchase or meet a minimum spending threshold in a certain time frame. After that, depending on the card, you can earn 1-5x points per dollar spent.
For example, the Alaska Airlines card comes with a 25,000 mile bonus. To get that, you just need be approved for the card (and pay the $75 USD annual fee).
You can get 50,000 points with the Citi Prestige card when you spend $3,000 USD in the first three months.
On the other hand, the Starwood Preferred Guest American Express gives you 25,000 points after you spend $3,000 USD in the first 3 months.
Typical card bonuses range between 25,000 to 50,000 points, though sometimes they can be as high as 100,000. That’s why cards are so great—you get an instant balance of thousands of points for very little work.
Added category spending bonus — Most credit cards offer one point for every dollar spent. However, the good credit cards will give you extra points when you shop at specific retailers, or, if it is a branded credit card, with a particular brand. This will help you earn points much more quickly. I don’t want one dollar to equal just one point. I want the ability to get two or three points every time I spend a dollar. For example, with the Chase Sapphire Preferred card you get 2x points for travel and dining at restaurants, the Chase Ink gives you 5x points for office spending, and the American Express Premier Rewards Gold card 3x points on airfare. I try to get and use cards in my day-to-day spending that give me more than just one mile per dollar spent.
Low spending minimum — Unfortunately, in order to get the great bonuses these cards offer, there is usually a required spending minimum. While there are ways to fake your spending, it’s best to be able to get the bonus using normal day-to-day spending. I typically sign up for cards with a minimum spending requirement of $1,000–3,000 USD in a three- to six-month period. My favorite spending minimums are the offers that require you to make one purchase in order to unlock the bonus!
While you shouldn’t necessarily avoid high-minimum spending cards as they have substantial rewards, it’s a good idea to start small because you don’t want to get stuck with so many cards that you can’t meet the minimum spends. Once you get the card, you can’t reapply for the card, so don’t go overboard and miss out on the sign-up bonus.
That’s why having a goal and starting small is important with credit cards. You don’t want to dive into the deep end before you’re ready because one mistake in this game can leave you stuck with spending requirements you can’t meet (and bonus points you can’t earn)!
It’s easy to go crazy and sign up for 10 cards in a short amount of time. But then to get the bonus points, you might find yourself stuck with having to spend $10,000-30,000 USD in a very short period of time. That’s a lot of pressure.
Managing your ability to meet the minimum spending requirements is key because if you are spending more money than you usually do just to get these points, the points are no longer free. Only spend what you normally would and not a penny more.
If you’re looking for ways to meet your minimum spending requirements to “fake” your spending, there are plenty of creative ways to become a travel hacker.
Have special perks – All of these travel credit cards offer great perks. Many will give you special elite loyalty status or other extra perks. I want cards without foreign transaction fees, free checked baggage, priority boarding, free nights, and much more. It’s not just about just getting miles; it’s about what else comes with the card that makes my life easier!
Annual fees – No one likes paying annual fees for credit cards. Many of the fees for company branded credit cards range from $50-$95 per year. I pay an annual fee. For those who travel a lot and fly a lot, I think it is worth it to get a card with a fee. Fee-based cards tend to give you a better rewards scheme, where you can accumulate points faster, get better access to services and special offers, and get better travel protection. With these cards, I have saved more money on travel than I have spent on fees.
Foreign transaction fees
The majority of credit cards charge a 3% fee when you use them overseas. Credit cards are great to use because you get a good exchange rate from them but if you are paying a fee every time you use the card, then it doesn’t become as good. The simplest card for avoiding foreign fees is the Capital One Venture Card. There is no yearly fee but there’s also no rewards structure (OK, there is but it sucks. Here’s why). This card is for people who want simplicity and don’t care about points (though that’s just crazy talk). However, if you decide you want points and see the value in the yearly fee (which is usually pretty low. See above), the best cards for avoiding overseas fees are the Chase Sapphire Preferred, Starwood American Express, any airline branded card, Barclay’s Arrival Plus, or Chase Ink. They are way better than the Capital One card but everyone’s spending needs are different, right?!
Will This Hurt My Credit?
While it’s true that “churning and burning” i.e. opening an closing a lot of credit cards at once can hurt your credit, applying for a few credit cards over a period of time won’t kill your credit score. Your credit score will slightly dip every time there is an inquiry into whether that is a credit card or home loan or car loan. It’s how the system is set up. But so long as you space out your applications and maintain good credit, you won’t find any long term damages to your credit. Your credit rating rises over time as long as you maintain it, you aren’t going to have a bank officer tell you years from now “sorry, because you cancelled three credit cards in 2012, your loan is denied.” I once cancelled 4 credit cards in one day and the impact on my score? Nothing.
What If You Have Poor Credit?
Many travel rewards cards are only available to those with a high credit score, and if you have a low score (650 or less), you may find yourself being declined often and limited in your options.
There’s no magic bullet to suddenly fixing your credit score. If you have a low credit score, you need build it up. There are ways to do that and point-earning cards that can get you there.
First, here are five ways to improve your credit:
- Go to AnnualCreditReport.com and get a free copy of your credit report. This site lets you know what your credit score is so you can see what areas you need to work on.
- Dispute any incorrect information on your credit report with the credit reporting agencies—Experian, Equifax, and Transunion. Don’t let mistakes bring you down.
- Get a secured credit card. These cards require you to put down a cash deposit, think of it like a pre-paid credit card (or a credit-card-in-training). If you decide to put $500 USD in your secured credit card, you can use up to $500 USD each month and then pay it off. Spending and paying off your balance in full each month is a good way to build up your trustworthiness. A good secured card will have automatic reporting to the three major credit bureaus. This will help you build good credit history and increase your score. For example, HSBC offers a secured Visa card with a $0 annual fee for the first year and $200 USD minimum deposit. Check with your local bank or any credit card issue to see what they offer and get it. Overtime, you can raise the limit and this will raise your score allowing you to move to a regular credit card.
- Become an additional cardholder (authorized user) on the card of someone else with good credit—you will inherit their score. It’s like they’re vouching for you. This can instantly improve your score. Warning: Your missed payments will also appear on their account, so don’t add someone or have someone add you if they aren’t on top of their finances. This works both ways
- Pay all current bills on time and don’t get into more debt (and move your current debt to low- or zero-interest cards. I love the Discover and Chase Slate cards for this.
Credit scores improve over time but they don’t take forever….and you don’t need to be debt free to make it happen. A few smart months of money management and you’ll see your score rise.
For those with low or no credit, Capital One, Barclays, and Discover all offer cards for people with little or bad credit. Moreover, ask your local credit union (or call one of the banks above) if they have any prepaid cards you can get, call up the major banks or walk into a branch and ask the teller. All financial institutions have products for people with poor credit. Get them and constantly work at it. If you’re passive, it won’t improve, but if you push the banks and prove you’re not a risk, you’ll soon be getting the good cards that can get you the good bonuses!