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Credit card rewards, specifically travel rewards, are an extremely useful resource to help you save money on your travel expenses. They can lead to nearly free flights and hotels stays or allow you to take luxury vacations that you wouldn't be willing to spend the cash on.
Throughout the Covid-19 pandemic consumers have largely been hoarding rewards points in hopes of a safer and easier time to use them. Some consumers are beginning to use their rewards, while others are waiting for a fully safe world to begin traveling again. Regardless of which option you take, it is important to know the downsides of holding onto your travel rewards.
Here's what you need to know about why you should use your points and miles sooner rather than later.
While inflation primarily applies to cash in your pocket, inflation can also impact the value of your travel rewards.
A recent study conducted by Citi and The Harris Poll indicated 28% of travelers will be using credit card points or airline miles to book their next adventure. The same survey indicated 74% have or will pay using a credit card, suggesting some consumers are deciding to earn more travel rewards rather than spending what they have. And as airlines and hotels continue to recuperate after the near travel halt during the initial pandemic shutdowns, they are looking for ways to eliminate this risk off their balance sheet.
The simplest way to do this is by charging more points and/or miles to book a flight or hotel room. Southwest Airlines raised their award prices by roughly 6% in April 2021, and Delta Air Lines raised award prices for flights on partner airlines in Oct. 2020.
These are just a few examples, but every year at least a few major loyalty programs announce devaluations to their award charts, or eliminate them altogether. It's all but inevitable that you'll have to pay more for an award flight or hotel room in your loyalty program of choice a few years from now.
One tip to help avoid the rising cost of award travel is to focus your efforts on earning transferrable rewards like Chase Ultimate Rewards or American Express Membership Rewards. By earning rewards specifically tied to an airline or hotel, you are vulnerable to travel brands making adjustments to their loyalty programs. Transferrable bank points allow you to take advantage of different program's sweet spots, ensuring you shell out as few points as possible.
Throughout 2020, credit card issuers offered many promotions to keep customers engaged, offering bonus points for normal spend on their cards. But 2021 has truly been a year of resurgence from issuers to grab new customers. Banks have relaunched cards with new features, introduced entirely new products and added massive welcome bonuses to many of their most popular cards.
For instance, Chase launched big bonuses on its Chase Sapphire Preferred® Card (which has since gone down) and the British Airways Visa Signature® Card, Iberia Visa Signature® Card and Aer Lingus Visa Signature® Card.
However, this presents issues for travel providers as there is now a large swath of rewards that have been earned, but have yet to be redeemed.
And with more points and miles on their balance sheet, airline and hotel loyalty programs are incentivized to reduce the risk of outstanding rewards by devaluing them. In the past year and a half, Delta SkyMiles and United Airlines have both devalued their points by eliminating ways consumers can use each program's rewards.
Devaluation is an ever-present risk of earning travel rewards, and there isn't a great way to avoid it. However, to minimize the damage of devaluation, keep your account balances low by spending your rewards quickly and strategically.
Having a glut of travel rewards sitting in your loyalty accounts can be a great feeling of possibility, and maybe a small brag with your friends and family. However, consider that you aren't using the rewards to their true potential — creating memories traveling and reducing the cost of travel.
If you decide to earn travel rewards through credit cards, it is vital to remember the purpose of travel rewards — free travel. Additionally, it is important to maintain a mentality of "earn and burn", meaning that you aim to use the points nearly as quickly as you earn them. This will eliminate the risk of your points being devalued and keep more cash in your pocket.
As the pandemic reaches its 18th month, it's no secret that traveling has been either restricted or not possible for many, especially internationally. Of course, it is recommended to get a vaccine and consult your physician to decide if traveling is suitable for you.
Selecting a travel credit card can sometimes be a puzzling decision. There are an ample amount of great options with tempting welcome offers. But before you jump at one, there are a few important questions to ask:
- What kind of rewards would benefit me the most? Airline miles, hotel points or transferable points like Chase Ultimate Rewards?
- What categories do I regularly spend in? These could be things like restaurants, gas, groceries or travel. Based on your spending, select a card that will reward you the most.
- What benefits would I find value in? Credit cards come with many different benefits — like if you're an avid flyer, travel insurance can be extremely useful in the case that your flight is cancelled or delayed.
- Am I open to paying an annual fee? Annual fees can range from a reasonable $95 per year to upwards of $700 annually. However, cards with annual fees typically come with benefits that can justify the cost (if you actually use them, that is).
Here are some of the best travel rewards credit cards currently available, along with their welcome offers.
Chase Sapphire Preferred® Card: The Chase Sapphire Preferred is giving 60,000 Chase Ultimate Rewards points after new cardholders spend $4,000 in the first three months of account opening. Ultimate Rewards points are transferable to 14 airlines and three hotel loyalty programs.
Chase Sapphire Reserve®: The Chase Sapphire Reserve offers new cardholders 60,000 bonus points after you spend $4,000 on purchases in the first three months from account opening. The Sapphire Reserve has the same travel partners as the Sapphire Preferred but comes with more travel benefits like airport lounge access, although you will have to pay a higher annual fee.
Citi Premier® Card: The Citi Premier card has a welcome offer of 60,000 ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening. Plus, for a limited time, earn a total of 10 ThankYou® Points per $1 spent on hotel, car rentals, and attractions (excluding air travel) booked on the Citi Travel℠ portal through June 30, 2024. (See rates and fees).
American Express® Gold Card: The American Express Gold Card has a welcome offer of 60,000 Membership Rewards® points after you spend $6,000 on eligible purchases with your new card within the first 6 months of card membership. Membership Rewards are transferable to 18 airlines and three hotel loyalty programs. Terms apply.
Capital One Venture Rewards Credit Card: The Capital One Venture Rewards card is offering 75,000 bonus miles after spending $4,000 on purchases within the first 3 months of account opening. You can transfer Capital One miles to 15+ loyalty programs. (See rates and fees).
Hoarding your points isn't beneficial because it leaves you vulnerable to external factors that are out of your control. But mainly, it doesn't award you with invaluable travel experiences.
This is why earning points and miles is only half of the travel rewards journey, and it's equally important to have a plan to use the rewards you earn. It can make sense if you're saving points for a specific trip, but make sure you cash in your rewards as soon as you can. Without a plan, you could see your trip cost more than initially predicted.