Travel Rewards Credit Cards – What You Need To Know

Earning travel rewards is a convenient way to accumulate points or miles that can be used towards flights, hotels and even car rentals. If you are a frequent traveler, these rewards can allow you to enjoy that much-anticipated vacation even sooner or help you get an airline ticket when an unexpected trip presents itself.

Sometimes it’s a bit confusing to understand all the ins and outs of travel rewards since many credit cards offer different types of rewards. Here’s a quick overview to help you navigate travel rewards more easily.

How do travel rewards credit cards work?

Travel rewards credit cards work in much the same way as other rewards credit cards. The difference is that the points or miles that you earn can be redeemed towards travel-related expenses such as airline tickets, hotel accommodations, or car rentals. It generally works like this: When you make a purchase, you will earn one or two points/miles per dollar spent. These points/miles accumulate with each purchase you make and are stored in your account. Once you reach a certain amount (the actual number varies from card to card) you can redeem them for travel, statement credits, gift cards or merchandise. The redemption options depend on which card you choose.

Some travel rewards cards offer a much narrower range of rewards but a higher redemption rate. For instance, if you select a branded travel rewards credit card (Delta Airlines, American Airlines, etc.) you will earn points for that specific airline. In addition, you usually receive a better redemption rate when redeeming points/miles for a flight than when you redeem them for a statement credit. The negative aspect of using a branded travel rewards credit card is that the best redemption value is realized when you redeem points or miles for an actual airline ticket. Branded credit cards, whether linked to airlines or hotels, almost always give the best reward value to purchases of the specific brand.

Unless you travel a great deal and are extremely loyal to one airline carrier or hotel chain, you may want to consider a rewards credit card that gives you more flexibility when redeeming your points or miles.

Cash back credit cards and travel rewards credit cards can be very similar. You normally earn either 1% or 2% cash back per dollar spent on purchases. The cash back you earn can be used for a statement credit or a check (which can obviously be used towards travel expenses). However, travel rewards credit cards generally give you the most value when you redeem them for actual travel-related items.