Travel credit cards are just like regular credit cards, but they offer travel-related rewards, like airline miles, instead of traditional rewards like cash back. They are popular, of course, among people who travel frequently, like business people, students studying away from home or anyone trying to collect travel-related rewards for a vacation at the end of the year.
So for many people, the question is this: Should I get a travel credit card?
Travel cards come with benefits and drawbacks, and it is important to find the card that matches your needs, lifestyle and habits.
Should You Get a Travel Credit Card?
That depends, first and foremost, on what kinds of rewards you want.
“A travel credit card differs from a traditional credit card mainly in the type of rewards earned,” said Matilda Geroulis, co-writer for The Travel Sisters. “Instead of cash back, which a lot of traditional credit cards earn, travel credit cards earn miles, hotel points, points that can be used for both hotels or free flights, or for free hotel nights. Different credit cards offer other rewards, such as lounge access, priority boarding, free checked baggage, hotel elite status, no foreign exchange fees and more, depending on the card.”
Your credit card payment habits are also a major consideration. “Travel credit cards are best for people who pay off their credit card balance every month,” Geroulis said. “Usually these cards charge a higher APR for carrying a balance.”
ValuePenguin research analyst and Huffington Post Money and Financial Education contributor Robert Harrow agrees. “Travel credit cards have, on average, 17.89% APR, which is slightly higher than the overall credit card average of 15%,” Harrow said.
Rewards and APR are the two biggest concerns, but there are other considerations, as well.
Watch Out for Overseas Fees
“A foreign transaction fee is a 2.7-3 percent fee you pay your bank for every overseas card transaction,” said Alex Gerard, founder of Cards Mix. “When choosing a travel card, get yourself a card that doesn’t charge this fee.”
According to Bank of America, many credit cards charge an overseas transaction fee every time you use your card in a foreign country. The bank recommends using your credit card for big purchases but paying for smaller purchases, like coffee, in cash. This way you can avoid racking up a lot of overseas fees, but you can also avoid carrying large amounts of cash. Even better, look for a card that doesn’t charge overseas fees.
Double-Check Overseas Acceptance
“Despite an overwhelming number of supported countries and points of sales that AmEx and Discover claim in their reports, you will have more peace of mind with Visa or MasterCard,” Gerard said. “These cards are truly accepted everywhere. Another thing to keep in mind, in many places overseas you will not be able to pay with your American credit card if it doesn’t have an EMV chip on it. Particularly in Europe, you will definitely have problems when buying tickets and paying a toll in automated booth and vending machines. The good news that most travel cards today are issued with an EMV chip.”
For many travelers, the ability to use credit cards abroad is inconsistent at best, CNBC reports. The reason is EMV smart-chip technology is quickly becoming the worldwide standard because it is difficult to counterfeit. But because of the technology’s high cost compared to traditional magnetic strips, card issuers in the United States are lagging behind in putting EMV chips in their cards. If your card doesn’t have an EMV chip, expect to have the most trouble at automated kiosks, such as ticket machines in parking garages.
Watch Out for High Annual Fees
“Some travel credit cards have no annual fee, and some travel credit cards have an annual fee as high as $450 a year,” Geroulis said. “However, even if a travel credit card has an annual fee, sometimes it can be waived for the first year.”
Travel Cards and Your Credit
“Building credit isn’t easier or harder with travel cards,” Harrow said. “However, travel credit cards are generally more difficult to get over non-rewards credit cards. You generally need a FICO score of 720+ in order to qualify for a decent travel rewards credit card.”
“Most travel credit cards require a good credit history (good credit score, free from bankruptcies etc.),” Geroulis said. “Many of the best travel credit cards require a credit score of 700 or above, but it depends on the card. There are travel credit cards that are easier to be approved for that one can start with. If someone has a bad or no credit history, they should work on fixing that first before applying for travel credit cards.”
What Card Should I Get? A Travel Credit Card Comparison
According to Scott Smith, president of CreditRepair, these are the best three travel credit card offers for 2015:
Best points: American Express Platinum
- A 40,000-point bonus after spending $3,000 in the first three months.
- Annual $200 credit against airline fees, free concierge services, special travel packages and services, VIP airport club access, a cruise privileges program and more. Double points when booking at AmExTravel.com.
- $450 annual fee.
Best miles: Chase Sapphire Preferred
- A 40,000 bonus points for spending $4,000 in the first three months.
- Double points on all travel and dining purchases. Points are worth 25 percent more if redeemed for travel booked through the Chase Ultimate Rewards portal.
- Annual fee: $0, then $95 after the first year.
Best $0 annual fee: BankAmericard Travel Rewards
- Online-only signup bonus of 10,000 bonus points if you spend $500 in the first 90 days.
- 1.5 points on every $1 spent. Points can be redeemed for hotels, flights, rental cars and more.
- No annual fee, no foreign transaction fees. EMV chip technology.
Travel credit cards can be a great financial tool for some travelers, but they are not for everyone. They can help travelers accumulate airline miles, hotel points and other perks, but they generally come with higher APRs and require very good credit. Take inventory of your payment habits and your rewards preferences, and be sure to weigh any annual fees against the perks you will gain.
Your rewards preferences and payment habits should be the first consideration when deciding if a travel card is right for you. Weigh rewards against fees, go for the biggest possible sign-up bonus and work to achieve excellent credit before you apply.