Credit cards, for better or worse, remain one of the best ways to earn free travel. However, most credit cards offering travel benefits have terrible terms–high annual fees, exorbitant interest rates and junk fees like “foreign transaction fees.” So why do so many sites focus so heavily on credit card offers? The answer is simple: money. All sites, including this one, publish affiliate links which pay a commission to the referrer. Some bloggers make well into the six figures pushing credit cards on their readers. However, I do things differently than most other sites:
- I only publish what I consider to be the best available offers for free travel, whether or not they pay a commission.
- I don’t necessarily receive a commission myself from links that I publish. Many of the best credit card offers do not pay affiliate commissions to bloggers (but they might pay affiliate commissions to, for example, a travel agency).
- I won’t link to anything I think is a bad deal, even if it means that I lose money. My integrity is more important.
Generally speaking, credit cards come in a few different flavors and you need to clearly understand what you’re signing up for to have any chance you’ll actually get the rewards you are expecting. The broad categories are as follows:
Airline affiliated credit cards: These are cards that are directly affiliated with airlines and jointly marketed by the airline and the credit card issuer. Examples of these cards are the Alaska Airlines Visa, the Citibank Aadvantage MasterCard, and the Delta SkyMiles American Express. Typically you will earn an enrollment bonus when you initially sign up, after meeting a minimum spend requirement. Sometimes the bonuses are tiered, so you earn part of the bonus almost immediately (such as after the first purchase) and rest of the bonus after fulfilling certain conditions, such as buying tickets on the affiliated airline or meeting a minimum spending threshold. Most of these cards come with high annual fees, although some cards offer benefits such as baggage fee waivers and companion passes that may offset the annual fee. You will typically earn miles when you spend money on the card, usually 1 mile per dollar spent.
Hotel affiliated credit cards: The same as above, except these cards are affiliated with hotel chains. The enrollment bonus typically comes in the form of hotel points or certificates redeemable for free hotel nights. Unlike airlines, availability is typically good for redeeming hotel awards. At most hotels, if a room is available, you can book it. Also unlike airlines, hotel chains typically have only one award type for each hotel (with occasional sales), so you don’t have to worry about planning around “saver” award availability and finding that only “peak” (at much higher rates) is available. Some hotel points, such as Starwood, can easily be converted into frequent flier points, so combining an airline credit card signup with a hotel credit card signup could (after a points transfer) help you get enough miles for a trip that you’d otherwise be unable to take. Hotel credit cards typically come with annual fees, although most also include a certificate at renewal for one or two free room nights.
Bank administered travel program cards: These cards are the most heavily promoted on travel blogs (because they pay the highest commissions to bloggers), but are typically the most risky cards out there. Various banks and credit card companies offer a form of “rewards.” These are programs administered by the banks themselves. These have various names, such as “FlexPoints” from US Bank and “ThankYou Points” from Citi. Typically you earn a certain number of points per dollar spent which can be greater for purchases in particular categories, and you can then cash in the points for tickets based on the terms of the bank’s program. What makes these risky? The bank can close your account anytime they want, for any reason, and they don’t have to let you cash in your points if they do this. Some people whose accounts were suddenly closed believe that this was done because they became too efficient at utilizing the programs offered, and the banks were losing money as a result. Banks can also close your account (and your points will evaporate) if you are late on even a single payment. You can get some incredible deals with cards of this type, but be careful!
Tips And Suggestions:
- If you aren’t good at managing your money, this is not for you. Focus on “mistake fares” and other inexpensive ways of traveling. Credit cards have extremely unforgiving terms; late payments and interest charges will eat you alive!
- Signing up for multiple credit cards absolutely, definitely lowers your credit score. Other sites minimize this but there is a very real impact. Does it matter? Not really, if you don’t need credit right away. However, if you need to apply for an auto loan or a mortgage soon, this is not a game that I recommend playing.
- The best credit card offers waive the annual fee for at least the first year. To avoid paying the annual fee in subsequent years, you need to call in to cancel the card before the closing date of the statement on which the annual fee appears. However, banks will often make a “retention” offer in order to persuade you not to close the account. Sometimes they resort to empty threats. If they threaten you that your credit score will drop, or that points already awarded will be clawed back, ignore the threats (which are almost always bogus) and close the account anyway.
- Before you sign up, look at the redemption chart for the program involved and formulate a realistic plan for how you’re going to achieve the award you want. It’s also worth checking with the program administrator (such as the airline or hotel) for award availability on a number of different potential dates to make sure that you can actually redeem the award you want. Otherwise, you may end up with an account full of difficult-to-use points and a credit card you didn’t really want.
2 thoughts on “Credit Cards”
Something you didn’t touch on regarding credit cards, are fees for international transactions and how it varies per card.
This is a great point. I mentioned junk fees such as “foreign transaction fees” in the article, but there is a lot of variation in how much these fees are, and when they are charged. For example, my Alaska Airlines Visa (issued by Bank of America) will charge me a 3% “foreign transaction fee” whenever I make a transaction overseas, regardless of the currency it is made in. Meanwhile, my US Airways MasterCard (issued by Barclays) does not charge a foreign transaction fee as long as I am billed in US dollars (so, for example, in Costa Rica–where you have the option of paying in dollars or colones–I can avoid the fee by paying in dollars). And finally, my Marriott Rewards card, issued by Chase, has no foreign transaction fee at all. Before you swipe that card outside of the United States, make sure you know what it will cost you!