Published in: Credit Cards | Dec. 31, 2018
By: Lyle Daly
Travel cards are a popular way to earn free trips, but they don’t always live up to the hype. Learn what the biggest downsides of travel rewards cards are before you get one.
More and more people hop on the travel rewards bandwagon every day, and it’s easy to see why. You sign up for a credit card, use it to earn points, and then use those points to cover your travel costs as you go to exotic locations and stay in beautiful resorts. At least that’s the general idea.
In reality, it’s a bit more complicated than it appears. If you’re planning to get a travel card, you should know about the drawbacks of travel rewards first.
Many airlines and hotels offer a limited amount of award availability, which are the bookings you can make using your points. After that award availability is gone for the travel you want to book, you can only pay with cash.
Landing the award ticket or hotel stay you want often comes down to booking it early or getting lucky, especially if you’re visiting a popular destination. For people like me who book travel at the last minute, it’s tougher to use points.
Although there are plenty of stories of travel bloggers booking luxurious airfare and getting a ridiculously high value, such as $0.05 per point or more, those redemptions are few and far between.
Business-class and first-class international airfare are usually the only ways to score big-ticket redemptions, but it’s not like those seats are widely available. Again, the issue is limited award availability. That issue is magnified by the fact that business-class and first-class cabins are smaller, meaning less award space, and lots of travelers will be vying for those seats.
When you book a flight or hotel in cash, you may have the option of upgrading for a small fee, paid for either in cash or in points.
Upgrade rules tend to be stricter for award bookings. For example, some airlines and hotels only let you request an upgrade on an award booking when you check in, whereas travelers who paid in cash could try to upgrade at any time.
Travel protections are a common perk among credit cards, especially the best travel credit cards. These can include:
The problem is that you must pay for your travel using your credit card to qualify for these protections. When you book award travel, credit card protections normally don’t apply.
If there’s one major disadvantage travel cards have compared to cash-back cards, it’s the annual fees.
To be fair, you can find no-annual-fee travel cards, and there are cash-back cards out there with annual fees. But most travel rewards cards have annual fees, while many of the best cash-back cards do not. That’s something you need to account for when you’re deciding which type of card will be a better value for you.
Looking for a low interest rate? You aren’t going to find it with a travel credit card.
I wouldn’t call this a huge downside, because there aren’t many credit cards with low interest rates out there. That’s why it’s always better if you can pay off your entire credit card balance every month so that you never have to pay interest
That being said, if you think you’ll need to carry a balance, travel cards aren’t a good choice, because their interest rates tend to be higher than those of other cards.
No matter what type of points your credit card earns, their value could change at a moment’s notice, and changes are often for the worse.
If you’re earning points with a specific airline or hotel, they could adjust their awards chart and make bookings cost more. Just like that, your points are worth less.
While cards that are part of rewards programs with multiple transfer partners are less susceptible to this problem, they can still lose certain partners, which cuts down on your booking options.
None of this is to say that you shouldn’t get a travel rewards card. With their benefits, they’re perfectly suited to frequent travelers. It’s just important to realize that there’s more to it than getting a card and booking $10,000 airline tickets with ease.
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