Travel Credit Cards Offer Temptation and Rewards

Rachel Morey
May 1, 2018
Credit Card Rewards Temptation

Using credit card rewards is a trendy way to pad a travel budget. Nearly 70% of Americans have a travel rewards credit card according to a survey conducted by Harris Poll in late February of this year.

While it’s a great way to add some luxury or a few extra days to a trip, it can also cost consumers money that they wouldn’t have ordinarily spent. According to the survey results, one out of three of those cardholders admits that they overspend with their credit card just to earn points or rewards to put toward an upcoming vacation or trip. Half of the overspenders are Millennials.

It’s easy to understand how that happens. Many travel rewards credit cards tempt consumers with generous sign-up bonuses. Users can earn extra points or miles by meeting minimum spending requirements within the first three months of owning the card. On average, sign up bonuses for travel rewards cards offer users $450 in rewards, even after they pay the annual fee.

35% of people who choose not to use travel credit cards do so because they don’t want to risk taking on more debt. 10% say they have concerns about overspending to get rewards.

Travel rewards cards word for some people, though. For consumers who pay their credit card bills in full every month anyway, a travel credit card may add as much as $901 to their travel budget during the first year of use.

A 2016 Bureau of Labor Statistics data indicates that the average American spends just over $57,000 each year. If they could put just $25,000 of their total yearly spending on a travel rewards card with a mid-level sign-up bonus, they’d enjoy an extra $900 to spend on travel throughout the year.

Rewards in the second year of owning a travel rewards credit card drop. Without the sign-up bonus, the average rewards fall to $277. People who want to get the most benefit from travel rewards credit card do so by paying off their balance in full each month. Doing so prevents them from incurring expensive fees and interest charges.

To use accumulated rewards for a future trip, consumers must apply for a travel credit card at least six months in advance. It’s important to have good credit. Cards with the most lucrative rewards programs have tougher standards about minimum FICO scores.

Chase Sapphire Preferred is one of the most popular travel cards. The sign-up bonus is worth $625 in travel redemptions. New cardholders need to make $4,000 worth of charges with the card within 90 days of opening the account. This card also offers one of the most flexible rewards programs available.

The Chase Sapphire Reserve is a step up. It offers lots of extra perks but comes with a $450 annual fee. It’s offset by a $300 annual travel credit and TSA Precheck or Global Entry application fees are eligible for reimbursement. The sign-up bonus with this card is worth $750 and the spending criteria is also $4,000 worth of charges with the card within 90 days of opening the account.

For a no-fee option, the Bank Americard Travel Rewards card is an excellent choice. There’s no annual fee or foreign transaction fees. This card is great for people who like to travel but do so less frequently. The sign-up bonus is worth $200 and new users have to spend just $1,000 with the card within the first three months. This card is especially good for Bank of America account holders. They get a 10% reward bonus on all purchases. Using credit card rewards is a trendy way to pad a travel budget. When used correctly, you can potentially earn hundreds of dollars, just in one sign-up bonus. Just don't let the temptations of free money get you into debt.

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