Why Travel Cards

Travel Cards: A Brief Summary

Travel credit cards are not right for everyone. If you routinely carry a balance, spend more than you make when you use a credit card vs. debit card, then this isn’t the best option for you. However, by utilizing various budgeting tools and running the numbers travel cards can be very lucrative.

There are a lot of credit cards out there, and most rewards cards carry an annual fee. Great travel cards aren’t just branded by an airlines and hotels. More recently banks have gotten into the game. They’ll allow you to amass points for spend on any airline or hotel. It’s very important to look at how many rewards you’ll earn compared to the annual fee. That will determine if you’re getting the right return on investment.

Below are a few scenarios which may, or may not, be close to your spending habits to help you decide whether a rewards credit card is right for you.

Keep in mind it is often a combination of credit cards to get the best value but these are simple, everyday comparisons to easily show the value of credit cards points!

Scenario 1: Amex Everyday Preferred

$2,000 spend focused on groceries. Based on the table below, you would receive 5,700 American Express Membership Rewards points a month. You’ll easily get 1.7 cents by transferring points to one of the airline or hotel partners.

That’s an easy $96/month, or $1,067 a year in value (after the $99 annual fee). In comparison, A cash back credit card of 2% would get you $480.

Category of spend Monthly spend Bonus points* Total Points
Groceries $800 4.5 3,600
Dining and Bars $500 1.5 750
Entertainment $100 1.5 150
Travel $200 1.5 300
Gas $200 3 600
Other $200 1.5 300
$2,000   5,700

*Assumes you hit 30 charges a month

Scenario 2: Chase Sapphire Reserve

$2,000 spend focused on travel and dining. Here you get 5,000 Chase Ultimate Rewards points per month. Using a similar valuation of 1.7 cents per point this nets you $870 a year ($1,020 -$450 annual fee + $300 travel credit).

Category of spend Monthly spend Bonus points Total Points
Groceries $200 1 200
Dining and Bars $1,200 3 3,600
Entertainment $100 1 100
Travel $300 3 900
Gas $100 1 100
Other $100 1  100
$2,000    5,000

 

Explore more posts at Points, Miles, and More such as “My Perfect Credit Card Trifecta“. We’ll show you potential combinations for your everyday expenses!