Low-cost flights, heavily discounted hotel rooms, extra spending cash; ask just about anyone if they’d like to travel on the cheap this summer and you’d be hard-pressed to hear a “no.”
Yet about four in five U.S. adults are saying just that – and missing out on billions of dollars in travel rewards each year because they don’t understand how credit card miles work or don’t redeem the ones they’ve already earned.
Granted, rewards credit cards aren’t for everyone, especially people who have large amounts of debt or struggle to pay their bills in full each month. But there’s also a huge population of Americans who could financially benefit from travel rewards cards...but don’t. Are you one of them?
Understanding How Rewards Miles Work
According to a new travel rewards survey by CreditCards.org, almost 80% of respondents said they do not own a travel rewards credit card. Of those who don’t own one, about 10% admitted the reason was because they don’t understand how they work.
Perhaps even worse, about 17% of respondents who do own at least one travel card don’t bother to redeem their rewards. It’s been estimated that unused travel rewards equate to about $16 billion per year.
But the results of the survey aren’t too surprising. After all, many cards offer users “miles” to be redeemed towards travel – but these don’t really translate to actual miles at all. Many other cards dole out rewards according to a points system, with each one varying according to the particular issuer. Bottom line: If you thought you could cash in your 25,000 rewards miles for a free trip around the world, think again.
“The general rule of thumb for reward miles or any credit card rewards (such as points) is that they are worth $0.01 each,” explained Matthew Coan, owner of credit card comparison website Casavvy.com. “The main goal is to earn as many miles as possible and then get the most when you redeem them. Most cards that offer miles as their rewards make redeeming them for travel expenses your best option.”
So if you racked up 10,000 “miles” (or points) over the course of a year, you would essentially be able to redeem them towards $100 in travel expenses. However, there are ways to increase the number of miles/points you can earn, as well as increase the dollar value of these rewards if you spend strategically.
How To Maximize Your Miles
The CreditCards.org survey also found that nearly 38% of respondents without a travel rewards card said they don't travel enough to make it worth owning one. But what many don't realize is that you can earn miles without traveling. Not to mention, miles can often be redeemed for general discounts and cash back in addition to actual travel. That makes travel rewards cards a valuable tool for both jet-setters and homebodies alike.
If you’re interested in dabbling in travel rewards, here are a few steps you can take to make sure you get the most value out of your everyday spending.
1. Start With Sign-Up Bonuses
Most travel rewards credit cards will offer new cardholders a bonus for signing up. This is an effective way to rack up tens of thousands of miles in one shot.
“For anyone wanting to maximize the miles that they can earn, I would look into what current sign-up bonuses are being offered,” said Coan. “Sometimes these bonuses can be worth thousands of miles, allowing you to reach free or discounted travel faster.”
Usually, cardholders need to spend a certain amount within a particular time frame in order to claim their bonus, such as $3,000 within the first three months. However, by using a rewards card to pay for everyday expenses, rather than a debit card or cash, this is easily achievable for most people. Of course, the key is to then pay off the balance right away, or else interest and fees will negate any rewards earnings.
2. Spend On What Counts
Some travel reward cards will award a discount or more miles per dollar spent in certain categories. For this reason, it’s important to know what spending categories will yield the highest level of rewards for your card.
For example, Coan noted that The Chase Sapphire Preferred Card (which technically offers points) provides an additional 20% discount when rewards are redeemed for travel expenses. Other cards might offer additional miles or savings on food or gas purchases. “With any card that offers miles, you want to make sure you understand the redemption options and where they are worth the most,” said Coan.
3. Own More Than One Card
If you’re serious about earning rewards, it's wise to own a variety of rewards cards so you can maximize miles earned on every purchase you make.
Joshua C. Heckathorn, consumer credit and debt expert and President of Creditnet.com, explained, “Do you eat out a lot? Make sure you have a credit card that rewards you well for all dining purchases. How about travel, gas purchases, or trips to the grocery store? You should have a specific credit card you use for each and every purchase you make."
Heckathorn noted that if you're not earning three to five miles per each dollar spent on every purchase, you're likely missing out.
4. Shop Through Your Issuer’s Online Portal
Credit card issuers have their own online shopping portals, which can present a great chance to earn extra rewards when you need to make an online purchase. In fact, it’s possible to earn up to 10x the miles by shopping through your rewards card issuer.
“Before making any purchase online, make sure you're not missing out on an opportunity to purchase the same item through one of these portals in order to rack up a miles bonus at the same time,” said Heckathorn.
To take advantage of these portals, log into your credit card account via your issuer’s website. Once you click the link to the portal, a tracking cookie will be associated with your activity so you’re automatically awarded any bonus points accumulated when you check out.
Is A Travel Card Right For You?
There are certain instances when you should stay away from rewards credit cards – namely, if you’ve got a heap of debt to pay off or aren’t completely certain you can pay your credit card bill in full and on time every month. In this case, save up for travel the old-fashioned way and focus on staying debt-free.
But if you have your finances under control and are going to spending money on necessities anyway, why not charge it to a rewards card and earn back some of that money? Considering travel is a highly valued experience, especially among today’s young adults, responsible card users will find they can make their passion that much more affordable by leveraging rewards.
