Is Getting a Travel Credit Card Worth It?
There are plenty of credit cards out there that appeal to different lifestyles and how you intend to spend on your travels. You’ve probably seen dozens of commercials advertising travel rewards this and low APR that—but which card is the best one for you? First, we have to figure out where you are at the moment financially. There are plenty of articles online that give different opinions on which cards are the best ones to get, but they don’t quite address the individual. For instance, I’m a college student with bills, car payments and fairly low annual income. My approach to picking a card shouldn’t be the same as someone with a decent salary and better credit. You shouldn’t spend more than what you think you can pay off.
Next, you have to decide what you want out of your card. Do you intend to travel across the country or around the world? There are plenty of attractive benefits for some credit cards, such as: rewards points toward flights and hotels, no foreign fees on overseas purchases, and no annual fee to join. Before committing, take a look at some of these benefits to help you figure out which card is right for you:
Is Getting a Travel Credit Card Worth It?
There are a handful of wonderful sign-up bonuses to intrigue you out there. For example, American AAdvantage Card gives you 35,000 miles just for joining. This can get you a round-trip domestic ticket or miles used for an upgrade. Other airlines such as United and Delta will throw in upwards of 40,000 miles. This benefit is something you should consider looking into, since signing up for a card without this benefit will take far too long to earn.
More Points for Your Dollar
Most credit cards offer a point for every dollar you spend, but there are some that give you a little more. The Chase Mileage Plus Card will earn you two miles for every dollar spent. This in itself is a good incentive to use their card for many everyday purchases. If you’re going to spend money on things you need, why not reward yourself with each buy?
Don’t Spend More for Your Card
The downside of many of these rewards is you have to spend a minimum amount before you start seeing those points or miles in your account. One of the best benefits comes with the Starwood Preferred Guest Credit Card, but you have to spend at least $5,000 within six months. Companies offer bigger incentives as a way for you to spend more to reach that goal. Conversely, the Chase Sapphire Card has a low $500 minimum, but the benefits are drastically lesser than others.
Fees are the dread of every cardholder. Sometimes you forget about a fee, which can lead to overdrafting. Annual fees generally cost in the ballpark of $50 to $95 a year. Some credit card companies offer to waive the first year off; generally, cards that do not have annual fees tend to offer better access to special offers, such as more rapidly accumulating points and great travel protection if you lose your card. If you intend to spend a lot on your card, though, and gather enough points to fly free, the annual fee will seem worth it.
Avoid Those Foreign Conversion Fees
If you travel overseas occasionally, you should consider a credit card that doesn’t have foreign fees. The Capital One No Hassle Card, in this respect, is great. The only thing that might deter you from making it your go-to card is that it doesn’t offer the best rewards. Other cards you should look into include the American Express Platinum Card, the United Mileage Plus Card, and the Chase Sapphire Card.
APR is the annual percentage rate. Normally, APR will vary depending on how good your credit is. For first-time cardholders, you might want to research the fine print before making a decision. Most cards will charge well over 20% APR if you have no credit at all. Get a co-signer or choose to start with a small credit card with a decent APR to build some credit. Students in particular should take advantage of student credit cards such as Discover It for Students; other cards such as the Citi Simplicity Card offers 0% APR for the first 18 months.
Spend What You Can Afford
What gets people in debt is the extensive use of credit cards. Because the money is digital, they overlook that it needs to be paid off or the fees will pile up. Studies by psychologist Dr. Rick Scott reveal it’s easier to spend when you pay with a credit card as opposed to having cash in your hands because credit cards don’t show minimal value. Be cautious of how much you are able to afford before making a purchase. Check your bank account statements and calculate a reasonable idea of your top dollar and how much you can spend without going broke.
What Other Options Are There?
Ideally, credit cards can be very handy if you know how to use them. The benefits can outweigh small annual fees and APR costs if you gain more than you put into those cards. Let’s say you’re terrified of the negative consequences and credit cards aren’t and will never be your thing: Sites like Hotwire and Priceline can get you discounted tickets on flights and hotels.
In summary, I recommend travel rewards if you believe you are responsible and can pay off your card before any major costs. If you intend on taking multiple trips, you might just save more compared to going to a third-party site.