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 We've all gotten letters in the mail touting some new travel rewards program. Sometimes they come from a credit card company or directly from a major airline. But are these reward programs truly rewarding? Read on to find out.
The Program
Travel reward programs are often referred to as a loyalty rewards program, and they are generally a campaign devised to generate repeat customers for a particular company by offering a point gratification system for the customers' business. It is also meant to provide customers with a "thank you" for their loyalty to the company's product or service. That benefit is typically some sort of discount on certain items or services.Some credit cards offer travel rewards as a means of thanking their existing customers and attracting new consumers to their card. For example, MasterCard (NYSE:MA) offers a card that grants travel "miles" for each dollar the consumer charges. After the consumer earns a certain number of miles, he or she can redeem them for travel with major airlines or stays at major hotels. Visa (NYSE:V) and American Express (NYSE:AXP) have similar offerings.Hotel chains love loyalty programs as well because it's a great way for them to generate repeat business. For example, Hilton offers its "HHonors program", which allows consumers to earn travel points toward hotel stays or airline travel. One additional benefit of this program is that points can be transferred to family members who are part of the program. Similarly, Marriott offers Marriott Rewards, which allows consumers to rack up and redeem points at a variety of destinations around the world.Airlines also use loyalty rewards programs as a means of getting a wing up on the competition. For example, American Airlines offers its AAdvantage frequent flyer program, Delta (NYSE:DAL) has SkyMiles, Continental Airlines (NYSE:CAL) has OnePass, and United Airlines (Nasdaq:UAUA) has Mileage Plus. In fact, virtually every airline has a loyalty program, each with its own system for granting and redeeming points and rewards. (To read about airline stocks, read Is That Airline Ready For Liftoff?)Other types of companies have begun to get in on the action as well. For example, Carnival Cruise Lines (NYSE:CCL) has a SeaMiles program, and Royal Caribbean (NYSE:RCL) offers the Crown & Anchor Society. Even Amtrak has a rewards program.Travel Rewards Program Benefits
In many cases, travel rewards programs allow members to accumulate points and redeem them for flights, cruises or hotel rooms. In some cases, points may also be redeemed for items like movies, clothes or gas from certain vendors. Travel rewards programs can be a great way to "save" for that big trip. Participation in the programs may take some of the thinking out of socking away the money needed to fund a trip, because rewards points can be redeemed to cover many trip costs. Racking up travel rewards points may also be a better way to pay for a trip than charging it to a credit card and racking up interest. (To get the most out of your vacation, see Travel Tips For Keeping You And Your Money Safe and Ensure Your Vacation is Insured.)Drawbacks
Consumers should be aware that some travel rewards credit cards may charge an annual fee. That fee may essentially offset the value of the rewards earned. It's also a burden that might not be necessary because there are other travel rewards cards out there that don't charge an annual fee. Before signing up, consumers should consider whether the fee is worthwhile compared to the number of points they anticipate earning and compared to competitors' offerings. (For related reading, see Six Major Credit Card Mistakes.)
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