Are Travel Rewards Credit Cards Worth It?

After a period of time that saw many travelers limit or cancel their travel plans, Americans are hitting the road again. According to the U.S. Travel Association, as of October 2023, 54% of Americans said that taking time off to travel was more important than ever.

If you’re a traveler, using a travel rewards credit card could make sense if you’re interested in earning points or miles toward travel. The best travel credit cards can also offer additional benefits beyond travel miles. Still, are the rewards worth more than what you may pay in card fees and interest on monthly balances? Is a travel rewards card always worth having? Read on to find out.

How Travel Rewards Credit Cards Work

A travel credit card focuses on the accumulation of points or miles that can then be redeemed for travel-related awards. Such awards can include airline flights, hotel stays, car rentals, and more. Airline rewards credit cards typically provide you with miles for the purchases you make using the card, while general travel rewards credit cards tend to give you points. Whether you bank miles or points, cardholders should be able to use them to defray the cost of their travel.

Each card has specific terms for earning and redeeming points or miles. For example, depending on the travel card, you may be able to earn more than a one-to-one return on dollars spent using the card. You might be able to get three times (or more) the dollars spent when you use the card to pay for a flight as compared with the one mile (or point) for every $1 spent on purchases unrelated to travel, such as groceries. This earning rate (and other terms) can vary among cards, so keep that in mind when making comparisons.

Who Benefits Most From Travel Rewards Cards?

A travel rewards card is best for people who travel frequently. Those who fit this category fly and stay in hotels throughout the year. They may be better able than others to book on slow travel days and during off seasons to maximize their rewards. Their volume of travel also provides more opportunities to make the most of their rewards and extras than are available to infrequent travelers. Others who can benefit from a travel rewards credit card include:

• Business owners: If they travel for work regularly and have a lot of expenses while doing so, they will benefit by using the card often.
• Consumers who pay off their balances every month: This is a good thing to do with any credit card, but it’s especially important with travel cards, as, like any rewards card, they usually have higher interest rates than other credit cards.

The Cost of Monthly Balances

It stands to reason that the more money you charge on a travel rewards card, the more points or miles you’ll get for those purchases. If you pay off your credit card balance monthly, thereby avoiding interest charges, your rewards can be worth more than the cost of having the card, which should be just the annual fee. However, if you don't pay off your balance every month, the interest charges along with the annual fee may end up outweighing the value of the card’s benefits, especially because interest charges compound when you carry a balance from month to month.

How can you ensure that you’ll pay the full bill each month? Some consumers limit their spending to one credit card, making it easier to track against your budget and pay off monthly. Isolating spending can also make it easier to rack up the amount needed to get significant points or miles.

Travel credit cards can also be a good financial deal for business owners and the employees who have company cards issued in their names on the account. These cards can allow them to leverage business travel and operational expenses to earn rewards for the business. Of course, it’s the responsibility of the business’ accounting department to pay off the monthly balance to avoid interest charges, and the business owners will set the rules on how rewards can be used.

The Cost of Initial Bonuses

Credit card issuers make travel rewards sound like they are free, but they are not. The amount of money you spend to earn rewards, including money related to initial bonus offers, can be a lot, so consider those amounts when trying to determine whether or not a card is worth its cost. In addition, in some cases, rewards redeemed for cash can end up being taxed by the Internal Revenue Service (IRS).

Let’s do a cost-benefit analysis. One rewards card might offer 40,000 points for spending $3,000 in 90 days. Another might offer the same amount of points for spending $1,000. The lower spending requirement might sound like a better deal, but higher fees and blackout periods associated with the second card could potentially lower its value. Moreover, the spending required for those appealingly hefty bonus points might not fit your budget, and going over budget could cost you a lot in interest charges if you can’t pay off your card. It’s important to measure all features and costs against your individual spending and travel patterns before deciding which card, if any, is worth the cost.

Also, consider whether you’d prefer to earn bonuses in the form of miles or points. If you’re loyal to a particular airline brand, for instance, it could make sense to choose a co-branded airline rewards card that offers a sizable miles bonus.

Travel Rewards Card Limitations

Travel rewards cards have terms and conditions just like any other credit card. It’s important to understand how those work when weighing whether travel rewards cards are right for you.

Say you get a travel rewards credit card and plan to use it all year in order to rack up points for a vacation. Be aware that airlines and hotels may limit the availability of flights and accommodations for cardholders who wish to redeem travel rewards.

For example, there may be travel blackout dates or limits on seat availability that prevent you from booking rewards travel. Peak days and seasons vary among travel brands, so a travel rewards card may not be worth having if you cannot use the rewards points or miles when you need or want to use them.

The Bottom Line

A travel rewards credit card may be worth having, but it depends on how frequently you travel, whether you can afford to charge the amount required to qualify for rewards, if you earn enough in rewards value to justify any annual fees, and your ability to pay off the card balance on a monthly basis. The cards typically benefit people who travel often for work or leisure and can afford to charge enough to earn significant points or miles through one-time bonuses and ongoing purchases.

Be sure to pay attention to the APR and fees. You can also compare bonus incentives from different issuers to determine whether travel rewards credit cards are worth it based on your individual spending patterns.