Your travel goals, monthly spending, and comfort level around managing payments will all be factors when it comes to choosing the card that’s right for you. When starting out as a free traveler, it’s important to understand the types of rewards cards you can get and how they work. That’s the point of this article.
Here are the different categories of rewards cards and why we like them.
1. Transferrable Cards: All-Star Cards
These cards are normally the best, MVP cards for the beginner and advanced free traveler. Why? They are really valuable and offer great flexibility in case you aren’t exactly sure what airlines you need, or if you want to use rewards for free airfare, hotels, or rental cars.
The rewards for these cards are tied to the bank’s rewards programs. The big names are Chase (Chase Ultimate Rewards), Citi (Citi ThankYou Points), and American Express (Amex Membership Rewards). Capital One Miles are also transferable. One of the best starter cards is the Chase Sapphire Preferred card. Often, these cards offer a great sign-up bonus for an annual fee around ~$100, but sometimes the first year fee is waived. Sign-up bonus values can range from $250 to $750.
Why do we like All-Star cards? Maximum Value and Highly Flexible
a) Travel Portal – You can use the bank’s travel portal to book travel with rewards similar to using Expedia or Travelocity. That’s straightforward and easy.
b) Transfer Partners – You can often maximize your value by transferring the rewards to a partner airline or hotel loyalty program. Here’s a list of transfer partners organized by program here: Major Bank Transfer Partners Charts.
c) Flexibility – Let’s use Chase Ultimate Rewards as an example. Say you have three separate trips where you want to use the Chase travel portal to rent a car for Trip A, fly to Paris on United Miles for Trip B, and visit family using Southwest Miles for Trip C. You could do all of these things with Chase Ultimate Rewards. United and Southwest are Chase partners. So, instead of just getting a United or Southwest credit card, you have options to transfer points or go through the Chase travel portal.
Our favorite is the Chase Sapphire Preferred: 6 Reasons We Love Chase Sapphire Preferred.
2. Co-branded Cards: Airlines and Hotel Cards
These cards are called “co-branded” because there is an airlines or hotel that has partnered with a bank to offer a credit card. These cards offer specific earnings for that particular loyalty program and often come with benefits (e.g. free night stay or free checked bags) exclusive to the card and company. Two examples are the Chase Southwest Rapid Rewards Priority Credit Card or the American Express Starwood Preferred Guest (SPG) Card.
Why we like Co-branded cards? Ease-of-Use and Stand-alone Points
If you always travel on Southwest or love to stay at Marriott Hotels, then it makes sense to get a card with a great bonus and rack up the points with that particular brand. Most brands give you extra points for purchasing their flights or hotel stays when you use their card.
Don’t stop there! Picking one airline card and using it exclusively for the rest of your life will never maximize your free travel. It might be easy, but you’re missing out on thousands of dollars!
For example: Did you know that the All-star, transferrable cards could include your favorite airlines and hotels as transfer partners? This knowledge could end up getting you an extra 100,000 points! Here’s a classic example of someone thinking they only need a Southwest card because they only fly on Southwest: You’ll be shocked at how much free travel you could earn this year.
Last point on co-branded cards: Earned rewards go directly to your loyalty account. Therefore, if you ever cancel or change your co-branded credit card, you don’t have to worry about losing your points.
Note: Airline rewards usually have best value for free travelers. It makes sense when you realize that you can always get a discounted hotel, but you rarely get discounted airfare. However, hotel cards are starting to offer some amazing bonuses and benefits. So, once you get your card(s) for free airfare, make sure you pick up a hotel card for free stays.
3. Statement Credit for Free Travel Cards
The Capital One Venture card and Barclays Arrival Plus card work differently than the programs with Amex, Chase, and Citi. These miles end up serving as statement credits towards travel purchases you have already made. This can be super helpful if other rewards don’t cover certain travel expenses, or you find cheap flights that are a better value than redeeming points for an award flight. Note, Capital One Miles are also transferable.
Why we like Statement Credit cards? Ease and diversity of use.
Think of these cards as helping to pay for all kinds of travel: airfare, hotels, Airbnb stays, trains, cruises, tours, or other travel-related expenses. You use the card for your travel expenses, then you “erase” the purchases on your credit card statement, like a rebate, using your miles.
Example 1: Let’s say you go to Europe with free flights using Chase points. You can use Venture Miles or Arrival Miles to get other travel expenses covered. For example, you get 2 train tickets in Europe for $250. You can use your Venture card to purchase them. Then, a month later you can use 25,000 miles to erase the $250 charge. These miles can also work if you find an awesome hotel on Priceline, Hotels.com, or want to stay at an Airbnb.
Example 2: I used my Barclays Arrival Plus card to pay for a 2-day private tour of Machu Picchu. When the credit card statement arrived, I used miles to erase that cost on our statement because the charge was coded as “travel.”
The strength of this type of card is that you don’t have much to figure out. You purchase your travel with the card. You reimburse yourself later with miles.
Some people wait to get a credit card until right before they travel. If they get this type of card, they can go ahead and use the card on the trip for travel purchases that will end up being free. In other words, you don’t have to hit your bonus on the card before you can make rebate-eligible purchases with it. So if you are leaving for Europe in three weeks, consider getting one of these cards so you can get some free travel! These miles come in super handy when you want to do that excursion or tour that would otherwise be outside of your travel budget.
Pro Tip: Points enthusiasts are not as keen on these kinds of cards because their value has a low ceiling, whereas rewards programs with transfer partners can be really valuable. For example, you could get an International Business Class ticket by transferring 70,000 points and booking with United Miles. To use Capital One Miles, you would have to pay retail price for the flight. That ticket may cost you $6,000, meaning 600,000 Capital One Miles!
4. No Annual Fee Credit Cards: Great if you’re starting out or building credit
There are some really good cards that do not have an annual fee. While cards with an annual fee will generally have higher sign-up bonuses, you can still get some good bonuses and good value out of no annual fee cards.
Why do we like No Annual Fee cards? They are essential.
No Annual Fee cards are still great to have for several reasons. If you’re just dipping your toes in credit cards or don’t spend a lot, a no annual fee card can be an easier way to get a bonus. The last reason is that people without credit history need to get a starter card to establish a history of good credit and on-time payments. With a no annual fee, you can keep build up your credit without worrying about any fees.
Remember, it’s always good to keep your oldest credit card. I made this mistake several years ago before I knew any better. I thought I was helping my credit score by getting rid of the card. However, your oldest card has the longest credit history. The banks love to see a long history of good credit. If you cancel your oldest card, you will lose that good history!
Note: Many people absolutely refuse to pay extra fees to a bank. That’s totally understandable. If you’re doing that on principle, it’s important to do the math in order to see if a card with an annual fee would actually bring you more value. For example, if a “no annual fee” card gets you $100 in free travel, you are netting a $100 value. If a $95 annual fee gets you $625 in free travel, you are up $530! Keep in mind, many annual fee cards have the first year waived, and you always have the option to either cancel or downgrade a card in the future if you don’t want to pay the annual fee in the future.
So, here’s the question. What kind of cards do YOU want in your wallet?
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