Credit cards are playing a crucial role in today’s economy across the globe. People are using them to pay their grocery bills, electricity bills, purchase vehicles, and even sticks of chocolate. Unlike the United States, the use of credit cards elsewhere is in its nascent stage and expected to rise in the future. The citizens of USA have an everlasting bond with credit cards, and probably every individual would have come across several advertisements promoted by celebrities. What is interesting is the bonus provided by these credit cards for signing up.
With a plethora of financial companies offering numerous credit cards, it has become difficult to choose the significant card that would benefit frequent travelers or those who love to fly without shelling any money. Travel credit cards provide the opportunity for users to accumulate miles, which they can convert to a ticket. Additionally, these cards offer free upgrades, rewards, loyalty bonuses, and complimentary airport lounge access.
“Skinrood earned more than 100,000 points by making transactions for the house he constructed in Utah using Visa and American Express cards. He then utilized the points to travel to Arizona on a trip with his family that saved $1,500.” You can be Skinrood too if you have carefully picked your credit cards that will allow you to travel and stay without paying anything. All you have to do is understand and pay close attention to miles and points offered by the credit cards.
So, how to search for a card that is right for you and especially benefits traveling?
In general, there exists no particular travel credit card. Credit cards are available under different formats providing various rewards that suit different people. For example, you can use AMEX card to book flights, Visa for your everyday needs, and totally a different card if you own business. Therefore, it is important to understand that there is no perfect card.
Things to consider
1. Sign-up bonus
Each credit card offers something or the other for signing up. You have to find a larger sign-up bonus. Several cards offer at least 25,000 miles for signing up, but you can get bonuses as high as 50,000 and more. The rewards associated with the card will only begin once you fulfill the minimum spending amount requirement. Once you meet the minimum spending limit, you will start earning anywhere between 1x and 5x reward points per dollar spent. The Guest American Card gives 25,000 points when you spend $3,000 within the first three months.
Most credit cards award one point for each dollar spent. However, you need to look for those that offer higher margins. For instance, the Chase Sapphire Preferred gives 2x point for dining and traveling. It is preferable to go with the card that gives more than just a single mile for spending a dollar.
2. Meeting the minimum spending cap
A better way to meet the minimum spending amount for any credit card is to use it for all your daily expenses. It includes your gas, cell phone bill, electricity bills, groceries, and any other expenses. If you begin using that card for all your monthly expenses, you can easily meet the minimum spending requirement. Once done, do not stop at the minimum but continue to pay your credit card bills regularly and maintain the minimum. The continuous action will help you accumulate points that you can redeem to travel to any destination in the world without shelling a penny. However, you might need more than just one card.
3. Annual fees
All the credit cards require you to pay a particular amount as a yearly fee. However, a few cards waive the future annual fees if you meet the spending requirement for the previous year. For instance, if your card comes with a limit of $10,000 per annum and if you meet the minimum spending amount of $8,000 within the first six months, then you do not have to pay the second year annual fees. Do check the details, as the spending amount changes from one card to another.
4. Keep an eye on the APR
Do keep an eye on the annual percentage rate or APR. The APR for a credit card depends on the financial institution and their governing rules. Therefore, read thoroughly the documentation provided before signing up. Usually, the value is between 15 and 25 percentage. If you maintain a balance from one month to the next, you will possibly pay more interest fees than you truly gain through the points accumulated from your spending.
5. Foreign transaction fees
Depending on the card you apply for, you may need to shell out foreign transaction fees. Most of the financial institutions charge around 3% as foreign transaction costs. However, a few companies waive off the fees depending on the spendings or the type of the card. For example, American Express waives the fees for its premium cards. Also, Discover and Capital One do not charge any foreign transaction fees for their credit cards.
6. Impact on your credit score
Generally, your credit score takes a diving by five points or a little more when you apply for a credit card. Irrespective of the credit cards you hold, you can still maintain a healthy credit score. Yes, you can do it by quietly paying the monthly bills on time and completely.
7. Choosing the travel credit card
Before signing up it is necessary to understand what is important to you. That is, do you value the sign-up bonus, will you meet the minimum spending, or do you have a particular airline that you fly frequently? Every card is different and offers different benefits. The aim is to choose a card that suits to your requirement.
If you understand how to utilize the credit card in an appropriate manner and pay the bills on time, you can easily outsmart the credit card companies. You can further earn big rewards and points, which you can, later on, redeem to book free flights and hotels across the globe. Remember, credit card companies are not here to give away money!
Excellent tips. Credit cards don’t have to be as complex as people make them. I think one reason it becomes complex is they don’t understand the underlying concept of credit.
We felt strongly enough about that idea that we have a couple articles on the subject on our site! Here’s the general version if interested, it complements the above pretty well for those who aren’t convinced:
https://upgradedpoints.com/beginners/credit-cards-credit-scores-explained/