Who I Am and My Objective
I’m someone relatively new to the whole travel rewards credit card game. While I have heavily researched the topic, I still have yet to explore the extensive list of perks that come along with being a cardholder. However, I’m very excited to find all the nooks and crannies of this mysterious world that has opened up to me.
There’s a lot of information about travel rewards. So much so, that all that data can be overwhelming. However, I’m fascinated by the topic, and I’d like to explain a bit about how this system works, in plain English.
How Does a Credit Card Work?
Every day, you might be spending money, on say, your morning latte before work, on your debit card. You tap your card, the money comes out of your checking account, and the transaction is essentially over. Easy enough.
With a credit card, you tap your credit card, you withdraw cash on credit, and the card accrues this as debt you pay later. Think of it as a short-term loan.
Sounds kind of scary, doesn’t it? After all, who wants debt? We’re all taught debt is bad, and you should have as little of it as possible.
There is truth to this adage, but it’s not the whole picture. Let’s explore the good, the bad, and the ugly.
The Bad, and the Ugly of Credit Cards
If you don’t pay your debt to the credit card, or to your mortgage, or your student loans, etc., on time, in full, then you can accrue interest added to your debt. And that can get scary if it gets out of control. You can also make the minimum payment on your credit card, on time, each due date. But the rest of your balance will accrue some interest, though not an interest penalty, which is a higher percentage of interest.
How to Avoid the Bad and the Ugly of Credit Cards
If you pay your debt, on time, the entire full balance, you don’t accrue interest added to your debt. Ideally, in this age and time, you can set up automatic payments through your bank and credit card company (which are sometimes one and the same), and pay the balance in full, on time, every due date. It’s also very important that you have the funds in your account to pay off the balance in full, otherwise you can accrue a financial penalty.
Credit Cards Sound Scary. So Why Would I Want One?
You might be thinking, “So I acquire debt, which is a risk, when I could just use my debit card? Why on earth would I want a credit card then?”
Meet the Rewards Credit Card System: The Good
Credit card companies and banks know that people don’t have an incentive to use their debt services, which carry risk, for no good reason. This is one of the reasons they created loyalty rewards programs.
Loyalty rewards programs work like this: You apply and receive a travel rewards credit card. In exchange for placing your purchases on the credit card, you get points, miles (which are worth a real cash value, typically 1 point equals a certain amount of cents), a credit, cashback, and more, that you can redeem for discounts and rewards toward travel.
What Kinds of Rewards and Discounts Can You Receive with a Travel Rewards Credit Card?
Every card is different, and it’s important to really read the benefits and drawbacks, as well as research reviews from credible sources. However, some cards offer things like discounted or free hotel stays, airline tickets, complimentary upgrades (say, to first class on an airline, or a room upgrade at a hotel), lounge access (including free meals), free checked bags, different travel insurances, a Global Entry/TSA PreCheck/NEXUS credit, and more.
Why Would a Credit Card Company or Bank Want to Offer Free Travel?
Credit card companies, banks, airlines, cruises, tours, hotels, etc., want your loyalty to their brands, and most importantly, what makes the world go round: your money. Offering perks and discounts is a beneficial marketing and revenue strategy to them, because you’re incentivized to be loyal to their brands that way. And in such a crowded market for your money and loyalty, these programs have proven lucrative for their brands.
So, Should You Get a Travel Rewards Credit Card?
This is a highly personal and financial decision which goes beyond any information or opinions I could give. In fact, I’m offering information and an honest review from my perspective, not advice. I’m not qualified to give such advice: if you want professional advice, seek a Certified Financial Planner.
The bottom line: If you believe you will pay your balance, in full, every due date (auto-debit helps immensely), and you know yourself to be a financially responsible person, then you might want to research and look into getting a travel rewards credit card.
However, if you know you won’t be able to achieve the level of financial responsibility required to earn the rewards and perks of a travel rewards credit card, or won’t use them, you probably don’t want one.
Why I Have a Travel Rewards Credit Card
After speaking with a Certified Financial Planner, and weighing the pros and cons of owning a travel rewards credit card, I determined that, with my level of financial means and responsibility, I wanted to get such a credit card.
The way I see it, I’ve been able to book free hotel stays and airline tickets, as well as explored the perks of exclusive lounge access at the airport, and free checked bags, which is a lot of benefits to me. However, I’ve also done a very large amount of research through different credible sources to get these discounts and perks. Some people might not have an interest in what I call “playing the game.” For me, it’s fun. I like learning all the benefits of my rewards programs and using them to my advantage.
Only you can determine if a travel rewards credit card is right for you. I hope my honest review of the travel rewards credit card system has piqued your interest, and that you’ll do your own research on the topic, including perhaps with a professional.
Important Disclaimer
With my opinions, I’d like to state a major disclaimer: I am not a professional Certified Financial Planner, or you, my dear reader. Only you, and perhaps a professional, can decide whether or not a travel rewards credit card is a sound idea.
However, while I can’t offer advice, I can offer some of the information I’ve found in my own research, and give my honest opinion on my personal experience with travel rewards credit cards. I don’t receive any money from credit card companies, or banks, hotels, airlines, cruise lines, etc. I’m not trying to sell you something, which I think is rare on the internet. Very rare. These are my honest opinions, and they are just that: my personal, honest opinions.
Thank you for reading this very important section.