How Much Travel Credit Cards Rewards Can Save Me
There are dozens of credit cards that offer cash back rewards, but many people just aren’t interested in them. Instead, these credit card users are gripped by the allure of earning travel rewards that can be nearly free.
It wasn’t long ago that award travel was just something that frequent travelers and serious mileage nerds were into. But the hobby of travel hacking has grown tremendously over the last few years, and earning travel rewards is now a mainstream pursuit.
But still, you might not be convinced that travel rewards are worth the effort. So let’s take a deeper look at how much money you can actually save when you use travel rewards. First, I’ll look at the cards that offer rewards in the form of statement credits. And then I’ll take a look at using airline miles and hotel points. Finally, I’ll offer some tips on how to maximize your travel rewards while minimizing your credit card fees.
Earning Travel Statement Credits
Several credit cards offer travel rewards in the form of statement credits. You earn these points and miles from your card’s sign-up bonus, as well as from your everyday spending. Then you simply purchase travel the way you normally would and redeem your points and miles for statement credits. Most of the time, you can redeem these rewards toward any flight, hotel, car rental, cruise, or tour package. You can even use these statement credits to pay for other airline charges, like baggage fees or charges for in-flight food and beverages.
There are several credit cards that offer travel statement credits. For example, the Discover it® Miles card offers 1.5 miles per dollar spent. Miles are worth one cent each as travel statement credits. It has no annual fees.
The Capital One® Venture® Rewards Credit Card features double miles on all travel purchases and has a $59 annual fee that’s waived the first year. Finally, the Barclaycard Arrival Plus™ World Elite MasterCard® offers double miles and gives you 5% of your miles back each time your redeem. It has an $89 annual fee that’s also waived the first year.
Earn Travel Rewards with the Barclaycard Arrival Plus™ World Elite MasterCard®
Let’s take the Barclaycard Arrival Plus™ World Elite MasterCard® as an example to see how much travel rewards you can earn with this type of card. To start off, this card currently offers new applicants 50,000 bonus miles after you spend $3,000 within 90 days of account opening. These 50,000 miles are worth $500 in travel statement credits by itself.
Next, let’s assume that you spend $30,000 per year on your credit card. This works out to $2,500 per month. It sounds like a lot, but it’s not outside the possibility of most people if they charge everything they can to their cards. This can include food, clothing, gas, insurance, and some utilities.
If you spend $30,000, then you will earn 60,000 miles, worth $600 in travel statement credits. But you’ll also receive 5% of your redeemed miles back, which is worth another $30. And when you include your sign-up bonus, you end up with a total of $1,180 in travel statement credits during your first year. During your second year, without the sign-up bonus, you can only expect to earn $630 worth of travel statement credits. And once you subtract the $89 annual fee that you will pay during your second year, you are down to $541 in net value.
Still, $1,180 is enough for two people to take a nice long weekend trip during your first year as a cardholder. This works if you pay about $250 each for airfare and another $680 for three nights at a hotel at around $200 a night plus tax. During your second year, you would at least have enough for two round-trip, domestic airfares to some destinations.
Travel Using Traditional Airline Miles and Transferrable Points
The cards that earn points or miles toward travel statement credits are relatively new. Traditionally, you earned travel rewards by earning airline miles or hotel points. These loyalty points could be earned by spending money with the travel provider, or by using their co-branded credit card.
Unfortunately, it’s much more difficult to pin down how much these points are worth, and how much you can earn in a year. Most airline credit cards offer one mile per dollar spent on most purchases and double points on airline tickets. Spending $30,000 a year offers you 30,000 miles, and you can supplement that when you purchase tickets and earn miles from your trip.
Also, many airlines offer domestic round-trip award flights starting at 25,000 miles. These include Delta, United, American, and Alaska. However, these awards are scarce and require advanced notice. Nevertheless, it’s still possible to earn one or two award flights each year if you use the airline credit card for all of your expenses, and you take a few trips each year.
At the same time, some airlines are now offering points or miles that are worth a relatively fixed amount. The advantage is that you can use these rewards to book any seat, and just pay enough miles to correspond with the price of the ticket. This gives you the flexibility to use your miles to travel on holidays and other peak travel periods. Airlines that offer these kinds of miles include Southwest, JetBlue, and Virgin America.
Earning Free Nights with Hotel Programs
Like the airlines, each of the hotel programs also offers its own co-branded rewards card. You can use these cards to earn points toward free night stays. These cards usually offer one point per dollar spent, and several points for hotel charges. Also, these cards are more likely to offer bonus points for other travel expenses, such as flights or rental cars.
Compared to airline credit cards, you can usually receive more value from a hotel card. For example, the Starwood Preferred Guest® Credit Card from American Express offers one point per dollar spent on most purchases, and up to 5x points at Starwood hotels. If you spend $30,000 on that card in a year, you will have at least 30,000 points. Free night awards start at just 3,000 points a night, but realistically, most mid-range hotels are 7,000 to 10,000 points per night. Therefore, you can earn enough points to earn three or four free nights a year just from this credit card. And when you redeem four consecutive nights, you get your fifth night free.
Long ago, airlines would offer free upgrades with miles. But now, these offers are rare and usually require you to buy a higher priced ticket, or make a cash payment as well. Today, very few people ever use their miles to upgrade. Instead, it’s best to look out for discounted upgrade offers at check-in. You might be offered a seat in domestic first class for $50 or a business class international flight for just a few hundred dollars. Like other airline charges, you can redeem your miles for a statement credit when you have a card like the Barclaycard Arrival Plus™ World Elite MasterCard®.
Maximize your Travel Rewards
By using the right credit cards and charging all of your daily expenses to them, you can earn some valuable rewards. However, this strategy by itself will limit you to just modest returns. To truly be a travel hacker, you will need to expand your rewards earning in every way possible.
For example, a skilled travel hacker will apply to multiple credit cards each year. We do this in order to earn the sign-up bonuses, but also to enjoy the latest cards with the best rewards for spending.
You will also want to sign up for every promotion offered by the airlines, hotels, and rental car companies. For example, nearly every hotel chain features a quarterly promotion that can accelerate how you earn points. Airlines often feature extra miles for some flights, and rental car bonuses are rampant.
Travel hackers also use every trick imaginable to generate more spending on their credit cards, and more rewards. We offer to pay for meals that are reimbursed by our company, clients, or friends. We’ll charge other people’s expenses and get a check in return. I even charged my (used) car purchase to my credit card earlier this year. Some airlines even offer extreme discounts when you buy miles. This isn’t free travel, but it can allow you to use miles fly in business class for the price of economy.
These are the main tricks I use to earn far more than 30,000 points or miles in a year. Just remember the cardinal rule of earning credit card rewards - always avoid interest by paying your balances in full, every month.
Travel hacking is going mainstream because it’s within the reach of most people. When you choose the right credit card and use it responsibly, you can take your first steps toward free travel. And when you build on that by taking advantage of all the deals and promotions offered, you can become an award travel enthusiast, and hardly ever pay for your reservations.