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Credit card rewards, especially travel rewards, are an extremely useful resource to help you save money on your travel expenses. They can lead to almost free flights and hotel stays or allow you to take a luxury vacation that you wouldn’t be willing to spend the money on.
Throughout the Covid-19 pandemic, consumers have largely accumulated reward points in the hope that they can be used more easily and safely. Some consumers start using their rewards, while others wait for a completely safe world to start traveling again. Whichever option you choose, it’s important to be aware of the downsides of keeping your travel rewards.
Here’s what you need to know about why you should use your points and miles as early as possible.
Inflation also applies to travel premiums
While inflation primarily applies to cash in your pocket, inflation can also affect the value of your travel rewards.
A recent study by Citi and The Harris Poll indicated that 28% of travelers will use credit card points or airline miles to book their next adventure. The same poll indicated that 74% have paid or will pay with a credit card, suggesting that some consumers decide to earn more travel rewards rather than spending what they have. And as airlines and hotels continue to recover from travel virtually halted during the pandemic’s initial shutdowns, they are looking for ways to remove that risk from their balance sheets.
The easiest way to do this is to charge more points and / or miles to book a flight or hotel room. Southwest Airlines increased its award prices by approximately 6% in April 2021, and Delta Air Lines increased award prices for flights on partner airlines in October 2020.
These are just a few examples, but every year at least a few major loyalty programs announce devaluations of their rewards grids, or eliminate them altogether. It is almost inevitable that you will have to pay more for an award ticket or a hotel room in the loyalty program of your choice in a few years.
A tip to avoid the increase in the cost of award travel is to focus your efforts on earning transferable rewards such as Chase Ultimate Rewards or American Express Membership Rewards. By earning rewards specifically related to an airline or a hotel, you are vulnerable to changes made by travel brands to their loyalty programs. Transferable bank points allow you to take advantage of the strengths of different programs, ensuring you spend as few points as possible.
More devaluations are on the horizon
Throughout 2020, credit card issuers ran a lot of promotions to keep customers coming back, offering bonus points for normal spending on their cards. But 2021 has really been a year of resurgence for issuers to win 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 example, Chase recently launched big bonuses on its Chase Sapphire Preferred® card and British Airways Visa Signature® card, Iberia Visa Signature® card and Aer Lingus Visa Signature® card.
However, this presents issues for travel providers, as there are now a large number of rewards that have been earned but not yet redeemed.
And with more points and miles on their track record, airline and hotel loyalty programs have an incentive to reduce the risk of great rewards by devaluing them. Over the past year and a half, Delta SkyMiles and United Airlines have both devalued their points by eliminating the ways consumers can use each program’s rewards.
Devaluation is a pervasive 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.
You might be missing the point
Having a glut of travel rewards on your loyalty accounts can be a great sense of possibility, and maybe a little bragging about your friends and family. However, consider that you are not using the rewards to their true potential – creating travel memories and reducing the cost of the trip.
If you decide to earn travel rewards by credit card, it is essential to remember the purpose of travel rewards: to travel for free. Additionally, it’s important to maintain a “win and burn” mentality, which means you aim to use up points almost as quickly as you earn them. This will eliminate the risk of your points devaluing and keep more money in your pocket.
As the pandemic hits its 18th month, it’s no secret that travel has been limited or impossible for many, especially internationally. Of course, it is recommended that you get the vaccine and consult your doctor to decide if the trip is right for you.
The best travel rewards credit cards
Choosing a travel credit card can sometimes be a confusing decision. There are plenty of great options out there with some tempting welcome offers. But before jumping to any of them, 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?
- In which categories do I spend regularly? It could be restaurants, gasoline, groceries or travel. Based on your spending, select a card that will reward you the most.
- In what advantages can I find value? Credit cards offer many different benefits. For example, if you are an avid traveler, travel insurance can be extremely useful in the event of your flight being canceled or delayed.
- Am I open to paying an annual membership fee? Annual fees can range from a reasonable amount of $ 95 per year to over $ 700 per year. However, annual fee cards usually have some advantages that can justify the cost (if you actually use them, of course).
Here are some of the best travel rewards credit cards available today, along with their welcome offers.
Chase Sapphire Preferred® Card: Chase Sapphire Preferred is offering a record 100,000 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.
Read the full Chase Sapphire Preferred Card review.
Chase Sapphire Reserve®: The Chase Sapphire Reserve is offering new cardholders 60,000 Ultimate Rewards points after spending $ 4,000 in the first three months of opening the account. The Sapphire Reserve has the same travel partners as the Sapphire Preferred, but offers more travel perks like access to the airport lounge, although you will have to pay a higher annual fee.
Read the full Chase Sapphire Reserve card review.
Citi Premier® Card: The Citi Premier card offers a welcome offer of 80,000 Citi ThankYou® points after spending $ 4,000 on purchases in the first 3 months after opening the account. These rewards can be transferred to 16 different airline loyalty programs.
Read the full review of the Citi Premier card.
American Express® Gold Card: The American Express Gold Card offers a welcome offer of 60,000 Membership Rewards® points after spending $ 4,000 within the first six months of opening the account. Membership Rewards are transferable to 18 airlines and three hotel loyalty programs.
Read the full American Express Gold card review.
Capital One Venture Rewards Credit Card: The Capital One Venture Rewards card offers 60,000 bonus miles after spending $ 3,000 on purchases within the first 3 months of opening the account. You can transfer Capital One miles to 16 different airlines and three hotel loyalty programs.
Read the full Capital One Venture Rewards credit card review.
At the end of the line
Accumulating your points is not beneficial as it leaves you vulnerable to external factors that are beyond your control. Most importantly, it doesn’t reward you with priceless travel experiences.
This is why earning points and miles is only half the journey of travel rewards, and it is just as important to have a plan for using the rewards you earn. It might be a good idea to save points for a specific trip, but be sure to cash in your rewards as soon as possible. Without a plan, you could find your trip costing more than you originally planned.
Capital One Venture Rewards credit card information was independently collected by Select and was not reviewed or provided by the card issuer prior to posting.
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.