Having the right travel rewards card could help you cover some, or maybe even all, of the costs of your next vacation. If, that is, you don't make the mistake of letting your rewards expire.
It's a misstep plenty of people make, according to a new Bankrate.com report. The site found 29% of people with a rewards card had let those rewards lapse. Nearly half, 46%, had lost airline or hotel rewards.
"A lot of people are sitting on airline, hotel, and credit card rewards that are worth a significant amount of money," Bankrate.com credit card analyst Ted Rossman said in a statement. "That's why it's so important to take advantage of them before they expire."
This isn't the only mistake you can make when choosing and using a rewards card. We talked to experts about what to look out for, and they gave us three "don'ts" to keep in mind when applying for a travel rewards card:
Nick Ewen of The Points Guy told Grow earlier this year that he used to think anyone who paid an annual fee on a credit card was a "sucker." But he has since realized credit cards with annual fees can be worthwhile if they offer the right perks.
For example, the Marriott-branded credit card that Ewen uses gives him a free night once a year at certain Marriott properties. "I'm using this certificate for a cost that would have been $275," he says. Considering the card's $125 annual fee, he's come out ahead by more than $150 for that year.
Some cards also waive the first annual fee. The United Explorer Card, for example, costs nothing the first year and is then $95 each subsequent year. The card also waives fees on the first checked bag for you and one other traveler on your reservation. With an Economy ticket, the checked bag fee is $30 for the first bag — meaning that a traveling couple who each check one bag could break even on the return flight of their first trip.
Cards with a fee don't work out for everyone, though. Less than a third of workers plan to use all their vacation days, after all, and if you don't travel often, there's no point in paying for perks you won't take advantage of.
Some cards offer a welcome bonus of 30,000, 40,000, or even 50,000+ points or miles, which can work out to a free flight or two.
But there's a catch, and an expensive one at that. Bonuses typically require you to spend a certain amount of money in a specific time frame. If you can't, you forfeit the bonus. For example, the Citi Premier Card offers 60,0000 points if you spend $4,000 on the card in the first three months. You don't want to up your spending unnecessarily, especially if you can't cover those costs by paying your balance in full and on time.
There are ways you can leverage your spending to take advantage of the bonus, especially if you have upcoming expenses like a wedding or home renovation that you can charge. But be realistic about your budget — and don't charge more than you can pay off. "Taking on too much credit card debt could completely offset any potential rewards you might receive," WalletHub analyst Jill Gonzalez told Grow earlier this year.
Rewards credit cards typically have high interest rates, which makes carrying a balance even more expensive. While standard credit cards have an average interest rate of 14.72%, airline and rewards cards have an average interest rate of about 17.6%, according to CreditCards.com.
"Another mistake people make is not paying close attention to how a card fits with individual spending habits," Ewen says. Most cards offer points or miles if you spend in a certain category of merchant. For example, it may offer double points on dining or triple points on gas. But if you don't go out to eat often or rarely use your car, you won't benefit from those bonuses, and that detracts from the value of the card.
A related mistake: picking a card that partners with a specific travel brand if you actually prefer to keep options open, Gonzalez says. "If you're a Hilton loyalist, look for a card that offers rewards specific to that chain of hotels," she says, but if you tend to switch up hotels and airlines based on which has the best rates for a particular trip, a general travel rewards card might be the more valuable way to go.
There is no one "best" travel rewards card that fits every wallet. If you avoid these common mistakes, though, it's easier to find one that works well for your needs and puts you that much closer to your next vacation.
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