When you’re on the hunt for travel credit cards, knowing where to start is half the battle. For credit card connoisseurs like the nerds at NerdWallet, sorting cards is a simple science that can be broken down into several basic categories. Once you know what to look for, analyzing travel credit cards is truly not difficult. The bulk of the challenge is cutting through the clutter of eye-popping advertisements and tantalizing promos. Here’s a look at the basic categories we start with when rating travel credit cards and making recommendations.
1. Rewards rate
If you’re looking for a travel card, you’re clearly prioritizing rewards. The best part of using a credit card is getting free stuff. It’s not hard to find a credit card that throws exciting intro deals and add-ons at you. It is hard, however, to find a credit card that yields a steady return rate throughout the life of your account.
Most rewards systems offer a certain number of “points” or “miles” per dollar charged. This number can be misleading. Most of the time, it’s safe to assume each point is worth $0.01. This isn’t always true. The American Express Blue Sky earns points that are worth about 1.33 cents each, for example, and the Hilton credit cards pay in points worth about 0.5 cents each.
For a fair comparison, start by turning the rewards return rate into a percentage. If a card offers one point per dollar spent, and each point is worth a penny, you’re earning 1% back on your purchases. You’ll find that a 1% base rate with additional bonus categories for accelerated earning is the industry standard. Anything below that is probably not worth your time, and anything above deserves a second look.
2. Signup bonus
Next, turn your attention to the signup bonus. Most quality cards offer one to entice potential customers. The bonus could be worth anywhere between $100 and $500. Bonuses usually come in the form of points, so again, it’s important to find out the actual monetary value of the sum. Travel cards with no annual fee often offer bonuses worth around $100. Cards with higher annual fees tend to kick back a little more.
3. Redemption options
You can earn all the points in the world, but if you can’t trade them for decent rewards, what good are they? When looking at travel credit cards, there is big distinction to make between general travel cards and service-branded credit cards.
By general travel cards, we’re referring to products like the Capital One Venture and Chase Sapphire Preferred. They don’t limit you to redeeming at a specific airline or hotel chain. Rather, you can select which services you utilize based on personal preference. Such cards grant a versatility that allows you to remain flexible in your travel plans by not imposing restrictions.
By service-branded cards, we mean the ones tied to specific airlines or hotels. You should only look at these if you travel a lot and always use the same services. For example, if you absolutely LOVE Delta’s Biscoff cookies and wouldn’t dare think to fly with another airline, you might consider applying for Delta’s SkyMiles credit card. Or, if you believe the softness of the towels at Starwood hotels is unparalleled and worth every penny, you might sign up for the Starwood American Express. The problem with airline and hotel-branded cards is how limiting they are. You can’t book a flight with Southwest using points from your Delta card. Only extreme loyalists should choose these over a general travel card.
4. Foreign transaction fee
If you plan on traveling internationally, you need to be looking at foreign transaction fees. You can easily locate this information in the card’s terms and conditions. Usually, cards will either charge 3% or waive the fee entirely. You don’t want to pay 3% on every out-of-country purchase. If you end up charging a grand on your family trip to the Cayman Islands, you would lose $30 to f/x fees. Overseas travelers should focus their attention on credit cards that waive the fee.
Finally, what additional features does the card offer? These are perks like free room upgrades, priority boarding, complimentary companion tickets and concierge services. Because you cannot always ascribe an exact monetary value to these benefits, they tend to be a little more difficult to quantify than rewards points. Don’t let the add-ons dazzle you. Analyze the rewards program first. Then, when you have a few solid options, see if the extra perks are enough to sway you one way or the other.