The bottom line: will a travel rewards card work for you?

Airline rewards terms may include the right to negatively adjust benefits

By Erin Landstrom

Travel rewards cards, such as free airline tickets or hotel rooms, are enticing, but are these credit cards the best for everyone? The short answer is no, but here’s how to tell if one is right for you.

Who benefits from these credit cards?

Not every consumer would benefit from having a rewards card for travel, but there are certainly some who could find it to be a great advantage.

• Frequent business travelers - If you have a job that requires you to travel a couple times a month, you would almost be foolish not to have a travel rewards credit card. These cards allow you to accumulate miles for every purchase you make, so if you are traveling two times a month, your frequent flier miles could add up over time. For the most part, companies will reimburse you for your travel costs, so by using your rewards card you are essentially receiving frequent flier miles free of charge.

• Avid vacationers - Another group of people that could benefit greatly from a travel rewards card are those who go on multiple vacations each year. Using your credit for daily purchases such as gas and groceries can allow you to accumulate miles. For many families, this could enable them to have a significant amount of miles. When booking a vacation, you are able to use those miles for airline tickets, which can make the cost of your vacation plummet. Who knows, maybe using your travel rewards card could even allow you to be able to afford another vacation each year.

Not everyone should have a travel rewards card, though

While frequent business travelers and avid vacationers can receive a great benefit from a travel rewards card, that isn't true for everyone.

For example: The everyday consumer likely won't benefit much from a travel rewards card unless they travel frequently. These cards often come with higher annual fees and interest rates than normal credit cards, so you could actually be costing yourself money by having a card for travel purposes. Also, accumulating frequent flier miles will do you no good unless you fly a couple times a year.

Instead, the average consumer might want to consider a simple cash back credit card, as these allow you to receive a percentage of the money you spend on purchases each month to be used as a statement credit.

What should you look for when applying for a travel rewards card?

Before you fall in love with the benefits compare travel rewards card applications, considering these key features you should look for to determine whether it is right for you.

• Annual fee - Generally, travel credit cards come with higher annual fees than traditional credit cards, so you should keep an eye on this when applying. If an annual fee is too high, the price you pay to have your card might outweigh the benefit of receiving frequent flier miles, which means you are probably better off without the card.

• Interest rate - In addition to higher annual fees, travel cards usually have larger APRs as well. Don't be fooled by 0 percent introductory APRs, because after this period the interest rate will skyrocket. If you plan on carrying a balance on your card, you need to be sure the interest you will accrue doesn't cancel out the benefit you receive from your frequent flier miles.

• Rate of accumulation - Another feature to keep an eye on is how fast you accumulate miles. For example, many cards will give you one mile for every dollar spent. If you don't plan on using your card often, it might take you years to get enough miles to be able to receive a free flight.

• Limits to rewards - Watch out for caps on the rewards you can earn.

• Points that expire - Don’t lose you points before they can be redeemed.

The bottom line?

Well, travel rewards cards just aren't for everyone, and you need to complete an in-depth evaluation of your personal situation to decide whether not you will actually benefit from having one. 

About the author: Written by Erin Landstrom who works for a credit card company. The world of credit cards can be complicated and confusing to consumers. Erin specializes in presenting this complex topic in a way that make it easier to understand and actually use, enabling consumers to make the right financial decisions for their individual situations.

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