How to Choose a Travel Rewards Credit Card

Credit cards are the single most lucrative way to earn airline miles and hotel points, and having the right mix of rewards-earning credit cards is now an essential part of any travel strategy. Thanks to the proliferation of new cards in recent years, consumers have more (and better) choices than ever, but that can also make choosing a card more complicated. Here’s how to choose the right rewards-earning credit card for you.

Types of Rewards Cards

First, it helps to understand the credit card landscape. There are three major types of rewards-earning credit cards.

Airline or hotel co-branded cards: These are the types of credit cards we’re all probably most familiar with. Airlines and hotel chains team up with issuers like American Express or Chase to offer rewards cards so that when you make purchases, you bank points or miles with that particular loyalty program. These types of cards are best for folks who travel with a few specific airlines or hotels and need to rack up points quickly.

Most airline co-branded cards earn multiple points or miles on purchases made directly from the airline and just one point or mile on other purchases. There are exceptions, of course. The new JetBlue Plus Card from Barclaycard earns six points per dollar on JetBlue purchases, two points per dollar at restaurants and grocery stores, and a single point per dollar on everything else. Many airline credit cards also offer elite-style perks such as free checked bags and priority boarding.

Hotel credit cards earn multiple points per dollar on purchases at a specific chain but are also likely to earn multiple points per dollar on other kinds of purchases. The Citi Hilton HHonors Reserve card, for example, earns 10 Hilton HHonors points per dollar spent on Hilton stays, five points per dollar on airline and car-rental purchases, and three points per dollar on all other purchases.

Hotel credit cards are also more likely to offer outright elite status. The Hyatt Credit Card from Chase, for instance, gives cardholders automatic Platinum status with Hyatt’s Gold Passport program, which includes benefits like earning 15 percent bonus points on stays, preferred room upgrades, and complimentary premium Wi-Fi.

Transferable rewards cards: Transferable points are valuable for their versatility. You can accrue these points into a single loyalty program account, and then transfer them to your choice of partner airline or hotel when you need them. In essence, you are diversifying your points portfolio by multiplying potential uses. Having more options for transfers also protects you against changes to a particular airline or hotel loyalty program.

American Express, Chase, and Citibank all have their own transferable points programs, as does Starwood Preferred Guest, the loyalty program of Starwood Hotels & Resorts.

American Express’s Membership Rewards program allows you to earn these types of points with a range of premium cards, including the EveryDay Preferred Credit Card, Premier Rewards Gold Card, and Platinum Card. Membership Rewards points transfer to 21 different travel partners, such as Air Canada Aeroplan, Air France/KLM Flying Blue, British Airways Executive Club, Delta SkyMiles, Singapore KrisFlyer, and Hilton HHonors.

Chase fields the Ultimate Rewards program, and you can earn points using cards like the Sapphire Preferred, Ink Plus, and the new Sapphire Reserve. The program currently has 11 transfer partners, which include airlines like Southwest, United, and Virgin Atlantic, as well as hotel programs like Hyatt Gold Passport, IHG Rewards Club, and Marriott Rewards.

Cardholders of the Citi ThankYou Premier and Citi Prestige cards can earn points with Citi’s ThankYou Rewards program, which boasts 13 transfer partners. The offerings include Etihad Guest, Qantas Frequent Flyer, Singapore KrisFlyer, and Hilton HHonors.

Starwood Preferred Guest’s points can be transferred to 31 airlines, including American, ANA, Hawaiian, JAL, LAN, Virgin America, and many others. Even better, when you transfer points in increments of 20,000 at a time, Starwood gives you a 5,000-point bonus, so you end up with 25 percent more miles in the end. There are currently personal and business versions of the Starwood Preferred Guest credit card from American Express.

Fixed-value cards: These cards accrue points with an issuer’s own loyalty program, such as Capital One Venture Rewards or Barclaycard Arrival Miles, and can be redeemed for travel purchases at a fixed value. The value of a point or mile with these programs is usually pegged at around one cent apiece. However, some cards, such as Capital One Venture, earn two miles per dollar on all purchases, so you are essentially getting a 2 percent return on your spending. You can also redeem points from Amex, Chase, and Citi’s transferable programs for airfare and some travel purchases at fixed rates as well, usually for about one to one and a half cents per point in value.

With fixed-rate points, you purchase travel as you would normally and redeem the points for a statement credit against that purchase. So although you are stuck at a 1-2 percent return on spending, this formula gives you a lot of flexibility. For instance, while award seats with a specific airline mileage program might not be available during peak travel times, you can simply purchase tickets as you would normally, then redeem fixed-value points for the purchase. You may use a lot of points since they are a fixed value, but at least you can redeem them for the travel you want.

Selecting a Card

So how do you choose one (or several) points-earning cards that will fit your needs? Here are the factors to consider.

Sign-up bonuses: Many rewards credit cards, in all three categories, offer sign-up bonuses of tens of thousands of points. In order to earn the full bonus, you must often meet a minimum-spending requirement within a certain time frame. For example, the personal Starwood Preferred Guest Credit Card from American Express currently offers a sign-up bonus of 25,000 points if you spend $3,000 within three months of signing up. Do a little research into a program’s history before you apply, and see how the current bonus compares to those offered historically. You might want to wait until a higher offer comes along depending on what you find out.

Annual fees: Another consideration is a credit card’s annual fee. The rule of thumb here is it’s only worth paying for a card if you’re sure you’ll get more value out of the card each year than the annual fee costs. The Alaska Airlines Visa Signature Credit Card from Bank of America costs $75 per year, but offers several money-saving benefits including an annual $121 coach companion fare that can save you hundreds of dollars on an airline ticket. The Hyatt Credit Card from Chase offers an annual free night at a Category 1-4 property that can be worth hundreds of dollars, which more than makes up for the card’s $75 annual fee.

Category spending bonuses: Some rewards cards earn multiple points or miles per dollar for specific types of purchases. It pays to analyze which merchants you patronize the most—such as grocery stores, drugstores, or gas stations—and choose a credit card that earns the most points at those merchants.

Program-specific perks: Any airline credit card you get should offer a slew of perks when you travel with that airline, including things like free checked bags, priority boarding, or discounts on in-flight purchases of food. Likewise, any hotel-branded credit cards should offer benefits such as automatic elite status, and thus the opportunity to earn bonus points on stays, room upgrades, late checkout, and complimentary Internet access.

Travel benefits: If you are a frequent traveler, having a card with ironclad protections is also well worth it. Some credit cards, such as the Chase Sapphire Preferred, offer primary rental-car insurance rather than the secondary insurance (which kicks in after the car agency’s insurance or your own personal insurance is exhausted), which can save a ton of time and money. Many cards also offer varying levels of protection in the case of lost, damaged, or delayed bags, trip cancellation and interruption, and more. If you travel internationally, be sure to get a card that waives foreign transaction fees (which are usually 2 to 3 percent) so that you save a little extra money on any purchases you make abroad.

The marketplace of travel rewards credit cards is richer and more diverse than ever. With some simple strategy tools, you can pick the right credit card for your needs and rack up the points and miles you need to get where you want to go.