If you are a frequent flyer, then you will most likely know about travel credit cards (TCC). If however, you are not sure what these cards are all about, then you are in luck as we are going to be taking a good look at this subject in this article. We will provide you with enough information to help you make an informed decision as to whether or not you should use one yourself.
What is a Travel Credit Card?
This is a type of credit that offers its users rewards whenever they make purchases with it. This can be a direct travel expense, like flight tickets or any travel-related expenses like hotel bookings and car rentals. The rewards offered will vary both in type and value from company to company. These rewards can then be redeemed for travel freebies like free flights and free stay at select hotels.
How Does a Travel Credit Card Work?
Every time you use a travel credit card (TCC) to pay for a travel-related expense, you receive a reward which can be in the form of points or miles. That is, if you book a flight, pay for a hotel stay or book a vacation with your travel card, you will automatically earn the reward offered by the card company.
If the reward you will earn are in points, these can be converted to a monetary value or converted to free flights, free hotels stays, free car hire services and other travel related rewards. If the rewards are in miles, then you can accumulate enough miles to earn free flights on specific airlines.
In addition to these rewards, some travel cards also offer you access to certain VIP lounges at airports, free travel insurance and other benefits. You should of course take some time to ensure that you understand exactly what reward a company is offering before deciding to sign up with them.
One important thing to note about these cards is that they do not offer uniform rewards for every transaction. That is, different types of transactions may have different levels of reward. There are cards that will offer you a higher reward when your purchases are done on specific hotels or airlines. Some may even offer you some reward, though usually minimal, for making non-travel related expenses on the account.
It is important to note that these cards operate much the same way as your regular credit card. That is, you repay with interest. The interest charged may however be higher than what your regular credit card will charge. You will usually pay an annual fee for the privilege of using the card. The more the rewards offered, the more you are likely to pay as annual fee. This therefore should be something you pay particular attention to when making your choice.
You can learn more about how this card works here.
Pros and Cons of Travel Credit Cards
Making a decision on whether or not to take on a service requires that you carefully weigh its pros and cons. So, to help you make this decision, we will be looking at some of the pros and cons you can expect from using this financial tool
Pros
The use of TCCs offer quite a number benefits, some of which we will now list below:
Reward for Usage
This is the first obvious benefit that a user will enjoy with these cards. We’ve already explained above that with every use of the TCC for travel related expenses, and in some cases other expenses, the user gets rewards which can then be converted to either free flights on specific airlines or free hotel stays among other possible benefits.
Additional Travel Benefits
Aside from the obvious rewards by way of points and free air miles, some companies also offer travel-related benefits. For example, some cards will grant the holder access to some airport lounges where they can relax between flights. Others can also offer travel insurance cover for travel accidents, lost luggage, cancelled flight, among others.
Discounts
With some cards, the users can get exclusive discounts for different travel-related services. These include discounts at specific hotels, airlines, car rental services. Of course with these discounts, you get to make some savings which can quickly add up when you’re a frequent traveller.
Absence of International Transaction Fees
Usually, using your credit card in a foreign land will attract an international transaction fee that can be anywhere from 2% to 3%. These charges are absent when you use a TCC. This can add up to quite some significant savings when you have to do loads of foreign transactions.
Credit Score Improvement
The efficient and responsible use of a travel credit card can help improve your credit rating. All you need to do is ensure that you make your monthly payments as at when due. Do this consistently, and you’ll experience continued improvement in your credit score.
Cons
Now that we have looked at the major benefits that a TCC can offer, let’s now look at the flip side and see some of the cons it may come with.
High Cost
The most talked about disadvantage of these cards are the high costs associated with them. These costs are usually the interest rate and the annual fees. On the average, travel cards have a higher interest rate. It’s not uncommon to see interest rates as high as 25% and even more.
Add to the high interest rate the comparatively high annual fee and the cost begins to rack up. This cost makes it mainly worthwhile for frequent travelers who can offset the high cost with the rewards they accumulate.
Limited Acceptability
Your TCC may not be accepted everywhere in the world. International travelers should therefore ensure that the card they have will be accepted where they are going.
Restrictions with Reward Redemption
Redeeming the points or travel hours you’ve accumulated over time may not always be as easy as you may like it. It’s common for some companies to have restrictions regarding how the rewards are redeemed. Examples include dates during which the rewards cannot be redeemed and also limitations on number of flights and hotel accommodation that will be available per time for redemption of rewards.
Risk of Credit Rating Decline
Given the high cost associated with the use of a TCC, the risk of missing your payment, and by consequence, a drop in your credit score becomes much higher. This is why special must be given to both the use of the card and the repayment of used credit.
A Look at the Different Types Available
There are different types of travel credit cards that a user can choose from. Every user must decide which is the best travel credit card (beste kredittkort reise) for their lifestyle and unique needs. To this end, we will quickly look at some of the examples you will find out there.
Hotel Credit Cards
These are TCCs that are linked to specific hotel chains. Rewards will usually be redeemed for free hotel accommodations, room upgrades and other services that offered by the hotel or its associates.
Airline Credit Cards
As with the hotel credit card, these types are linked to specific airlines. You can expect rewards like access to specific airport lounges, propriety boarding, free checked bags and other related offers.
Co-Branded Credit Cards
This is a kind of variation of the first two types listed above. The difference is that the hotel or airline partners with a credit card company to offer this card.
Premium Travel Credit Cards
This type of card is best suited for frequently travelers. In addition to travel credits, they also offer even more rewards and perks. Some of these include concierge services, airport lounge access, and more. These premium rewards will however come at a higher cost.
These are just some of the most common types. A little search online will reveal a few more variations.
Conclusion
In this article, we’ve provided you with the very basics that you need to know about travel credit cards. With the information we’ve shared, you should now be able to decide if this is something that fits your lifestyle and needs. Should you decide to begin to use a TCC, be sure to take some time to look through the different types available before settling for one.
