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You’ve read the claims: one credit card welcome bonus will cover the cost of a one-way first class ticket to Japan, an $8,000 value. Another travel card will help you earn points to redeem for an epic overwater villa and save $600 per night. Others will make it possible to finally take the safari trip of your dreams.
No one is disputing the appeal of first class flights and five star hotels—we all want luxury from time to time—but these claims ignore realities of everyday life. That overwater bungalow could cost hundreds of dollars in seaplane transfers just to arrive. A trip to Japan holds no appeal if you only have a four-day weekend. And a safari? Unless that’s the petting zoo near Grandma’s house, it might not make sense for your family.
For travelers who are more likely to fly in economy and stay at the Holiday Inn, do travel credit cards even make sense compared to earning cash back? The answer’s not nearly as clear-cut as someone who spends all year earning miles and points for a $25,000 bucket list vacation.
Disadvantages of Travel Credit Cards
More often than not, travel credit cards carry annual fees of $95 or more. Some hit as high as $695. These card fees can be worth it, but only if you consistently use the included benefits. Travelers who don’t need the perks will otherwise cough up an annual fee for no good reason, effectively throwing money away.
As you evaluate credit cards, be realistic with which benefits are meaningful to you. It’s easy to get starry-eyed over the idea of hotel suite upgrades and free breakfast, only to remember that basically all rooms at the Holiday Inn Express are the same (and all of them offer free breakfast). Similarly, airline lounge access isn’t relevant to you if all your upcoming travels are road trips.
Compared to old-fashioned cash back, travel rewards can be challenging to use. Both airline awards and free hotel nights can come with blackout dates or limited inventory to choose from. In order to redeem your free trip, flexibility is key: taking an extra connection, shifting your travel dates or traveling with a different brand can all help. For some people, this flexibility is no big deal but it can be a major frustration for other travelers. This could be a particularly big deal for families, who are often constrained by a school calendar.
Although a few travel programs offer a set value for every point you earn, that’s not always the case. A single airline mile could be worth anywhere from half a penny to a full dime depending on how you use it. To ensure you’re getting fair value from your rewards, you’ll need to spend time reading up on program options and hunting around for a good deal.
Program nuances aren’t the only thing impacting your rewards value, either. Sadly, program devaluations are common in travel rewards so the redemption you’re saving for today may end up costing a lot more in six months when you’re finally ready to book it. Historically, the rate of inflation on cash has averaged around 3% annually. With miles and points, though, the sky’s the limit.
Advantages of Travel Credit Cards
Included Travel Benefits
While travel cards with an annual fee might be a waste of money in some situations, in others they can be a major win even for basic travelers. In fact, some of the best card benefits specifically cater to economy flyers and limited-service hotels.
Airlines offer several overlooked benefits to cardholders that can make a travel credit card a necessary tool in your arsenal. Several American Airlines cards, for example, provide access to reduced mileage awards, allowing you to lock in a lower price if you’re traveling to select destinations. United Airlines, on the other…