The world of Credit Cards has changed a lot over the last several years. Cards once offered a small amount of points for purchases with either a low or no annual fees. Now the list of potential benefits seems endless. It is easy to get confused by the number of cards out there marketing shiny offers.
Stop. Take a breath and make a list. Lol, I am very visual so I always make a list or a spreadsheet when making a big decision. To me decisions about Credit Cards are big decisions. Never be impulsive when it comes to signing up for a new card. Here are some simple steps to help you decide what action you should take.
First Step: Review What you Have Already
A few months ago, I wrote a post Is your Credit Card a Dinosaur? The idea I was presenting was to review the Credit Cards you already have to see if the fees and benefits are still relevent. If not, it’s time to make some changes.
Before you get out the scissors, there are a few things you should consider first.
- Does it have an annual fee? If not, you can go either way with it. You may want to maintain it if it is linked to a bank that you have a relationship with in case you need a loan down the road.
- Is there a balance on it? If so, can you consolidate that balance elsewhere for a lower or 0% interest rate so that you can pay it off faster.
- If this is one of your oldest lines of credit (with no annual fee), you may want to leave it open. Long established lines of credit boost your credit score.
Second Step: Decide what you Really Need in a Travel Rewards Card
You think that you are ready to open a new card with lots of bells and whistles on it. First make sure that you will actually be able to utilize all those benefits. Most cards with a lot of perks have a higher annual fee. You need to be able to use enough of the perks to offset the cost of the card. Everyone has different needs. What’s right for me, may not work best for you.
Here is a list of some common Travel Card benefits. Look over the list and really think about how much (if at all) you would use them.
- TSA Pre-check/Global Entry
- Annual Travel Credits
- Trip Insurance
- No Foreign Transaction Fees
- Car Rental Protection
- Points/Rewards for spend
- Bonus Reward Levels
- Lounge Accesses
- Free Nights (hotels)
- Flight Upgrades or Free Bags
- Companion Flights
Third Step: Ask Yourself some questions
There are a lot of cards out there, each offering a different combination of benefits. Their annual fees typically range from around $49 to $450 depending on the depth of the benefits offered. Ask yourself some questions.
Nearly everyone stays in hotels. But how frequently and for how many nights do you stay most often. Do you usually stay with the same brand? These questions will help you decide if a Hotel Rewards Card is best for you. If you are fairly loyal to a brand, you may be able to rack up some points toward future stays. When your travel keeps you in the same hotel for several nights, you may be able to take advantage of the Fourth night free bonus.
Do I travel outside the United States? If the answer is no, you don’t need to worry about Global entry or Foreign Transaction Fees but you may still want TSA Pre-check.
How often do you fly? If the answer is 1-2 times per year US, you may not earn enough miles to merit going all in on an Airline Reward Card. It takes a lot of flights to get to the level in which you earn upgrades, free flights or companion passes. You could of course enjoy the free bags, and maybe use the travel credits or trip insurance.
Do you want or need Lounge Access? If you fly regularly, you might enjoy having access to airport lounges. Make sure if you sign up for a card (usually they have the highest level of annual fees to get this perk) that your home airport has the lounge type being offered.
Do you ever rent a car? If yes, you may like the Car Rental Protection. Insurance coverage costs about $11 a day or more from the Car Rental Companies. You can save a minimum of $50 on a 5 day rental. Compare the number of times you would rent a car per year times the average savings to determine if this is a worthwhile benefit for you.
Once you know which benefits you would actually use, DO THE RESEARCH to see which cards offer the closest match for the least Annual Fee. You may want to choose an Airline Reward Card and a Hotel Reward Card. Or just one overall Travel Card. There are a lot of sites on the internet that do side by side comparisons for credit cards and their benefits if you aren’t a list person like me.
Just be sure if you already have a credit card or are signing up for 2 cards that the benefits don’t overlap too much. You probably don’t need 2 cards with TSA Pre-Check/Global Entry because you will only use it on one. You can’t count that benefit toward offsetting the annual fee for the second card, if you are only using it on the first card.
If possible, take advantage of sign on bonus offers and make sure to complete the spend requirements to earn the bonus. A sign on bonus can really give you a boost in the right direction when just starting out with a card. Watch e-mails for special offers that allow you to earn extra points or to buy points at a discount. Waiting to choose Paperless Billing or add an Authorized User may earn you a bonus if you do it later on.
Tip: When you have more than 1 card or points program, figure out which ones offer the most points/rewards for every day items you purchase like Gas, Groceries, General Shopping, Dining Out and Travel. If it helps, put a little sticker on your card to remind you which card to use.
- Use credit wisely.
- Keep any cards paid off to avoid paying interest.
- If you buy something with a no interest period, calculate paying it off a month early…..just in case something comes up.
- Don’t pay more in Annual fees than the benefits you receive from a card and make sure you use those benefits.
I wish you many successes in conquering the world of Travel Rewards Cards to help you to travel both smarter and cheaper.
Other Good Reads on the Subject:
The Points Guy: The Best Travel Rewards Credit Cards of 2018
Your Mileage May Vary: Stop Falling In Love With Travel Credit Cards!!