Are Travel Rewards Credit Cards Worth It?

After a year that saw many travelers have to change or cancel their travel plans altogether, Americans are ready to hit the road again. According to a survey commissioned by Motel 6, two-thirds of Americans say they plan to travel in 2021.

Using a travel rewards credit card could make sense if you're interested in earning points or miles toward purchases. It's estimated that the typical traveler is sitting on 64,800 points/miles worth $684 in travel credit. Travel rewards credit cards can also offer additional benefits beyond travel miles. But is getting a travel rewards card worth it? Here's how to decide.

Travel Rewards Cards and the Monthly Balance

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're able to pay off your credit card balance monthly and avoid interest charges, then the travel rewards you get might be worth it. Paying off your credit card guarantees that you do not accrue high interest and fees that compound when you carry a balance from month to month.

So how can you ensure that you'll pay the bill in full each month? Some consumers limit their spending to one credit card and pay it off as a monthly bill. Isolating spending makes it easier to rack up the amount needed to get significant points or miles. You could try getting a single travel rewards card and charging all your purchases to it each month, then paying the bill when it comes due.

Travel rewards credit cards can also be a good deal for business owners or employees who have company cards issued in their names. These cards can allow them to leverage business travel and operational expenses to earn rewards and have the business’ accounting department pay off the monthly balance. Again, this can help avoid paying interest on charges.

Travel Rewards Card Limitations

Travel rewards cards have terms and conditions just like any other type of credit card. And it's important to understand how those guidelines 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 availability for cardholders wanting to redeem travel rewards. For example, there may be blackout dates on when you can and can't book rewards travel. Peak days and seasons vary among travel brands, so a travel rewards card may not be worth it if you cannot use the rewards points or miles when you need them.

On the other hand, a travel rewards card may be the best option for a person who travels frequently. People who fit this category fly and stay in hotels year-round and usually take advantage of slow travel days and seasons to get the most out of their rewards. So as you consider the pros and cons of travel rewards cards, be sure to consider your individual travel patterns.

Travel Rewards Credit Card Bonuses

Credit card issuers make travel rewards sound like they are free, but they are not. The amount of money you pay to get them, including the rewards cards with initial bonus offers, may determine if the card is worth the cost.

One rewards card might offer 40,000 points for spending $3,000 in 90 days, for example, while 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 that might be involved could potentially lower the card's value. So, it's important to compare all features and costs and your individual spending patterns before deciding which card, if any, is worth it.

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.

The Bottom Line

A travel rewards credit card may be worth it to you, depending on how frequently you travel, whether you can afford to charge the amount required on the card to qualify for rewards, whether you earn enough rewards value to justify any annual fees and whether you can pay off the card balance on a monthly basis.

Travel rewards cards typically benefit people who travel often for work or leisure and can afford to charge enough on the credit card required to earn significant points or miles from one-time bonuses and ongoing rewards. Just 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.