Travel rewards carry risks
Do homework on credit card offers
“Free travel” – two little words that can jump-start the pulse, excite the imagination and, if you’re not careful, take money right out of your pocket.
Travel rewards credit cards offering big sign-up bonuses and seemingly endless opportunities to earn points toward free flights, hotel stays and more can be almost irresistible. They’re so appealing, in fact, that you can entirely forget that issuers of these cards are in business to make money. Merchant fees, interest charges, late fees and annual membership fees all have a way of tipping the balance sheet in the issuers’ favor over the long term.
Here are five ways to make sure you end up a winner.
❚ Pay off your credit card balance every month.
Credit card interest rates are, for the most part, outrageous. Even highly rated, otherwise excellent credit cards charge annual percentage rates of anywhere from 14% to 27% per year when you carry a balance, making it all too easy to pay out double or triple what you might have earned in free travel.
❚ Include annual fees in your cost-benefit calculations.
Travel credit cards’ annual fees run the gamut, from noannual-fee cards to ones that cost hundreds of dollars to carry. Many are around $100 a year, which can be a bargain if you make good use of the card. But it’s still a setback in your quest to come out ahead. When you’re assessing the value of the travel rewards you’ll earn, remember to factor in the annual fee.
❚ Test run some travel bookings.
Earning, say, 50,000 airline miles for spending a certain amount of money on a card might sound like a steal, and airlines’ claims that those miles can get you a round-trip ticket aren’t lies. But will those miles get you a ticket where you want to go, when you want to go? The only way to find out is to search the airline’s website for flights to some of your likely destinations around the time you plan to take a vacation. You’ll find that traveling during peak seasons (think anytime school’s out) can require considerably more points than you might have expected.
❚ 4. Research your card’s little perks
If you’ve seen or heard a credit card pitch lately, the list of perks can seem tantalizing. Concierge service, hotel room upgrades and “luxury travel” benefits may sound good, but not every cardholder can benefit from them. Some credit cards come with membership in the Priority Pass network of airport lounges, which is great for certain travelers – and nearly useless for others.
❚ 5. Always browse the competition.
Always check competitor offerings before you book. Better properties, better seats and better prices could more than make up for the points you won’t earn if you stray.
June Casagrande is a contributor to NerdWallet, a personal finance website. NerdWallet is a USA TODAY content partner and is produced independently of USA TODAY.