Racking up points and miles with a travel credit card can help you save money on a future trip. But Americans are traveling less, and card issuers are adapting, in many cases by shifting rewards to better align with spending habits during the coronavirus pandemic.
"With travel spending and activity way down, [credit card companies] are quickly adapting to keep customers happy," says Ted Rossman, industry analyst at Bankrate.
For many Americans who are struggling to make ends meet, earning points for travel may not be a priority for a while. Consumers are instead spending on essentials like groceries, and are increasingly using credit to do so — as of April 2020, 46% of in-person grocery shoppers paid with a credit card, 39% with a debit card, and 15% with cash, according to a Bankrate survey.
Card issuers are responding to this shift by offering bonus rewards like points, miles, and even cash back for everyday purchases. "From a rewards perspective, there has been a surge in the number of cards offering high-end rewards at the grocery store," Rossman told Grow last month.
Here's what you need to know.
If you've already racked up rewards in airline or hotel programs, you don't need to let those sit unused until you're ready to travel again.
"In addition to free flights and hotel rooms, you can use your points and miles for a variety of nontravel redemptions," says Nick Ewen, points and miles editor at travel site The Points Guy. "However, it's worth noting that the vast majority of these options offer less-than-stellar value."
For example, you get about 0.7 cents per American Express Membership Rewards point and 0.8 cents using Chase Ultimate Rewards points when shopping at Amazon, which is less than if you just cashed out.
If you want to redeem your points or miles for cash back or statement credits, consider the total costs and benefits, Rossman urges. "Don't burn a ton of miles at a low valuation just to get some cash back," he says. "If you're going to take a sizable haircut on your value, you're probably better off holding the points until you can use them for something better."
"You could potentially earn points now and use them for a great trip later on once the travel industry rebounds," Rossman says.
In response to increased spending on essentials and at-home entertainment, card issuers have updated their programs to offer improved rewards. "These program changes represent card issuers recognizing that customers are using these cards differently these days," Rossman says.
The most popular travel rewards cards, like Chase Sapphire Reserve, Chase Sapphire Preferred, and Capital One Venture, are all making changing to address the shift in consumer spending, Rossman says.
For example, with Chase's new redemption option called Pay Yourself Back, Sapphire Preferred and Sapphire Reserved cardholders can redeem points as statement credits for eligible grocery, dining, and home improvement purchases at an increased value of 1.25 cents each, or 1.50 cents each, respectively. Before this upgraded rate, which lasts through September 30, 2020, you would only get a one-to-one value by redeeming Chase points.
Co-branded hotel cards from Delta, United, Marriott, Hilton, and Hyatt have also upped their grocery rewards. Examples include the Hilton Honors American Express Aspire Card, where you can earn 12X Hilton Honors points (up from 3X) at U.S. supermarkets through July 2020 and the Delta SkyMiles Blue, Gold, Platinum, and Reserve Cards upped from 1-2X to 4X miles at U.S. supermarkets through July 2020.
For specifics on a credit card you may carry in your wallet, you can check out the updating list of limited-time reward offerings for spending on groceries, takeout, and streaming subscriptions on CNBC Select.
Travel rewards card are usually either general use, such as the Chase Sapphire or American Express Gold, or co-branded cards in partnership with a specific airline or hotel chain like the Jet Blue Plus Card. "General travel rewards cards often offer miles and points that either never expire or have a long window in which you can redeem rewards — some as long as five years," Brenton Harrison, a Nashville-based financial advisor, told CNBC Select in May.
Rewards earned on general travel or cash back credit cards issued by major banks usually don't expire, with exceptions such as Wells Fargo, U.S. Bank, and Citi in specific cases, according to ValuePenguin. Co-branded cards usually have an expiration date for redeeming your miles, and the window is often shorter than that of travel rewards cards, Harrison explains — about one to three years.
Many Americans already have increased their credit card usage during the pandemic: Some 23% of consumers, or about 28 million people, have added to their credit card debt as a direct result of the Covid-19 outbreak, according to a recent CreditCards.com survey of 2,552 adults.
If you plan to take advantage of these new rewards options, credit experts suggest to do so carefully. You don't want to hurt your credit score or rack up large balances by chasing potential rewards.
Successfully earning rewards means using credit cards "only to buy things that you would have bought otherwise with a cash or debit card," Julian Mark Kheel, director and senior analyst at The Points Guy, told Grow last year.
The same goes for a travel rewards card: If you can stay sharp about your purchases and be responsible, this could be a great time to rack up rewards to enjoy down the line.
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