Lesson 3: How To Choose A Travel Credit Card
If you are just joining us, this is the 3rd installment of The Beginners Guide.
Lesson 1 – Figuring Out What Miles You Currently Have
Lesson 2 – Checking Your Credit Score
Recap
In Lesson 1, we talked about the importance of signing up for a free mileage tracking service like AwardWallet.
In Lesson 2, we talked about the need to monitor your Credit Score via free sites like Credit Sesame and Credit Karma.
In Lesson 3, we will tie it all together and get to the fun part of actually determining how to go about selecting a Travel Credit Card that earns free frequent flyer miles!
Pick A Card, Any Card
The number 1 question I receive via email is “I’m interested in signing up for a Travel Credit Card, which one do you recommend?”
Ultimately, picking a Credit Card for the first time is more of an art than a science since every situation is unique. So unfortunately there isn’t a one size fit all answer : (
The good news is that after you pick your first Travel Credit Card, you will very quickly figure out what features you like about the Card and the mileage program it earns into. When you go to apply for your next Travel Credit Card, you will know exactly what to look for.
That being said, I will try to cover various scenarios that Beginners may find themselves in however in the event you are having troubling deciding which Credit Card to pick, you can always email me at FrequentFlyerUniversity@gmail.com with your personal travel situation, and I would be more than happy to offer some recommendations.
Factors That Influence Which Travel Credit Card To Get
There are many factors that can influence your decision to sign up for 1 particular Travel Credit Card over another. To help Readers navigate this, I have ranked the most common factors in terms of what I think are most important.
- Sign Up Bonus – 60%
- Minimum Spend – 25%
- Annual Fee – 5%
- Current Mileage Situation – 5%
- Card Earning Structure – 5%
Sign On Bonus
The absolute easiest way to earn a substantial amount of frequent flyer miles is to sign up for a Travel Credit Card that offers a large Sign Up bonus. The larger the Sign Up Bonus, the more free travel you will get.
Therefore when starting your search for a Credit Card, you should always first look for the Credit Cards with the highest Sign Up Bonus and then work your way down from there.
While it may seem that there isn’t much difference between a 25,000 mile Sign Up Bonus and a 50,000 mile Sign Up Bonus, in reality that is the difference between quite a few free trips for you.
Typically most Credit Cards earn 1 mile per $1 spent on the card.
So if you were to sign up for a Credit Card A that only offers a 25,000 mile Sign Up Bonus, and there is a Credit Card B that offers 50,000 mile Sign Up Bonus, to make up the difference in the miles you missed out on, you would have to spend an additional $25,000 on Credit Card A. If there is a 100,000 mile offer, and you signed up for the 25,000 mile offer, you would have to spend an additional $75,000 to cover the difference.
Therefore it is fairly easy to see why it is important to get as many miles as possible from the Sign Up Bonus because that it ultimately what is used to get free trips.
In terms of what is considered a “good” Sign Up Bonus, in recent years anything above 50,000 is worthwhile. Typically if you read the Frequent Flyer University blog, I promote the cards that have really stellar sign up bonus. In recent years we have also seen offers that provide 100,000 miles like the British Airways Visa.
Since you are typically only allowed to receive a Sign Up Bonus once in your lifetime per each specific card, it is important to get the most miles out of the Sign Up Bonus because that is your only shot for that specific Card.
In short, any Travel Credit Card that offers less than 50,000 miles I would suggest avoiding.
Also it is advisable to always sign up for Credit Cards online. NEVER sign up for a Travel Credit Card on a plane, or at a hotel regardless of what the sign on bonus is.
99% of the time it is a lower offer than is available online.
If you receive a piece of direct mail or email for a Travel Credit Card from an airline or hotel company, always first research the offer online and see how it compares.
90% of the time, the offer online will be better, however 10% of the time you may receive a special targeted offer that is higher than the current bonus available online.
Basically always research your offer before you sign up for a Travel Credit Card to ensure that you are getting the highest possible Sign Up Bonus.
Minimum Spend
After you find a Credit Card that offers the highest Sign Up Bonus, the next thing you want to do is verify that you can meet any requirements that come with getting the Credit Card.
While some Credit Cards will give you the Sign Up Bonus without any strings attached, typically the larger the Sign Up Bonus the larger the strings attached.
While “strings attached” may sound like a bad thing, they are typically fairly easy to achieve and complete.
The most common “string” that is attached to Travel Credit Cards is called a Minimum Spend Requirement.
Minimum Spend Requirements are certain spending threshold that the Credit Card Issuer (ie. Citbank, American Express, Chase, etc) require you to spend on the Credit Card in a certain amount of time in order to receive the Sign Up Bonus.
A typical Minimum Spend Requirement would be something like the current Chase Sapphire Preferred Card which offers 40,000 Ultimate Rewards Points IF you spend $3,000 in 3 months.
While $3,000 in 3 months may sound like a lot, that comes out to only $1,000 a month for 3 months.
If you charge your Family’s groceries, gasoline, cable, cell phone, vacation, shopping, dining out, etc on your Credit Card, it is fairly easily to meet the Minimum Spend Requirement in the designated time period. Plus as an added bonus, you will earn points on all of those purchases.
If you sign up for a Travel Credit Card and are not able to complete the Minimum Spend Requirement, you WILL NOT get any of the miles from the Sign On Bonus.
In the case above with the Chase Sapphire Preferred, if you were unable to complete the Minimum Spend Requirement of $3,000 in 3 months, you would NOT receive any of the 40,000 Ultimate Rewards Points from the Sign Up Bonus.
Therefore, after selecting the card with the highest Sign Up Bonus, you should check what the Minimum Spend Requirement is and make sure that you are financially able to meet it.
If you are not able to meet the Minimum Spend Requirement, I suggest looking at the next Credit Card that has the largest Sign Up Bonus and keep working your way down until you are able to find a Credit Card that offers a high Sign Up Bonus but also has a Minimum Spend Requirement that you can meet.
Other Important Factors To Consider When Applying For A Credit Card
The factors below are important but not as important as the size of the Sign Up Bonus or Minimum Spend Requirements.
Annual Fee
Another important factor to consider is the Annual Fee.
While it is pretty much standard to have the Annual Fee waived for the 1st year, not all Travel Credit Cards do that. In fact some of the really high end cards like the United MileagePlus Club Card and American Express Platinum Card actually have annual fees that are upwards of $395 a year.
To be fair, those Cards do come with a lot of benefits (like airport lounge access) and occasionally do offer a large Sign Up Bonus, however with all Cards it is important to check to see what the annual fee is.
Since many Travel Credit Cards now waive the annual fee for the first year, it is easy to get turned off by a Card that may come with small annual fee that is not waived for the first year.
I make a point to stress that even if there is an annual fee of say $95, the amount of frequent flyer miles or hotel points you are receiving by simply signing up for that Credit Card can be redeemed for free flights or hotel stays worth upwards of $2,500 dollars.
If someone offered to trade you $2,500 worth of free travel for $95, most people would think of that as an amazing deal and would not be turned off by the fact that they still had to pay $95 instead of getting it for free…
Therefore don’t be blinded by an Annual Fee and let it prevent you from saving thousands of dollars down the road. I just consider it a cost of doing business.
Additionally, when thinking about Annual Fees, it is important to remember that it is always up to you whether or not you want to keep the Card in the long run. You will still get to keep any miles that you received, regardless of if you keep the Card open or not.
A typical example is that you may get a Credit Card that has the Annual Fee waived for the first year, use the large Sign Up Bonus that came with the Card to take a few trips, and then at the end of the first year you find another Travel Credit Card and switch to that new Card. If you aren’t using the old Credit Card, then you are free to go ahead and close it which also conveniently helps you avoid having to pay the annual fee.
I’d say this happens with 95% of Cardholders, so just keep that in mind when looking at Annual Fees.
What Miles Do You Currently Have?
While it is always smart to diversify your mileage assets so you have different options when redeeming miles, if you have a lot of miles in 1 frequent flyer program, it sometimes makes sense to get even more.
For example, I personally am based out of Chicago which is a United Airlines and American Airlines hub (headquarter). Additionally, I primarily fly United Airlines when I travel.
In my hypothetical example, let’s say I would like to use frequent flyer miles to take a free Economy flight to Europe next year. I know from my research at a minimum this will cost at least 60,000 frequent flyer miles regardless of what airline I fly.
Let’s say I currently have 35,000 United Miles and 5,000 Delta Miles. From reading Frequent Flyer University, I find out that there is an offer for a Delta American Express Card that offers a 50,000 SkyMiles Sign Up Bonus and there is also a United MileagePlus Explorer Card that offers 25,000 United Miles Sign Up Bonus.
Now under most circumstances, it would seem logical to sign up for the higher Delta 50,000 Mile offer.
However since I already have 35,000 United miles, it would actually make more sense for me to sign up for the lower 25,000 United Credit Card offer. When I combine the 25,000 United Sign Up Bonus with the 35,000 United miles I already have, I will have 60,000 United miles which is enough for a free Economy trip to Europe.
If I had gone with the higher Delta 50,000 Mile offer, when I combine it with the 5,000 Delta SkyMiles that I already have, I will only have 55,000 SkyMiles which is 5,000 miles short of a free ticket to Europe.
Although obviously every circumstance is different and is completely based on what miles you currently have, this is an important thing to consider. It is for this exact reason that Lesson 1 stressed the importance of knowing what miles you currently.
Usage Incentives / Category Bonuses
Usage incentives and category bonuses refer to how many miles / points you earn for putting purchases on your Travel Credit Card.
For example with the United MileagePlus Explorer Card, the usage incentive would be that for every $1 you spend, you will receive 1 United mile.
In addition, as a category bonus, for every $1 you spend on United flights, you will receive 2 United miles.
To be honest usage incentives / category bonuses aren’t really that important.
If a Travel Credit Card had a large enough sign on bonus but did not offer any usage incentives or category bonuses, I would probably still get it because remember that the majority of frequent flyer miles you earn for free trips are acquired through the Sign Up Bonus and not through actually spending money on the Credit Card.
For example, if a Credit Card has a usage incentive that for every $1 you spend, you will receive 1 mile, then to receive 25,000 miles (which is equivalent to a free domestic Economy flight on most airlines), you would have to spend $25,000! That is A LOT of money!
If a Credit Card offers 1.25 miles per $1 spent, to receive 25,000 miles, you would still have to spend $20,000 for a free domestic flight.
If a Credit Card offers 2 miles per $1 spent, to receive 25,000 miles, you would still have to spend $12,500 for a free domestic flight.
Obviously the higher the usage incentive, the less money you have to spend to earn free flights, but in the grand scheme of things you are still going to have to spend a lot of money on your Credit Card to get a free flight that might only cost you $250 if you bought it out of pocket.
The only time it is really important to consider usage incentives and category incentives is if you purchase large amounts ($10,000+) of specific products each year like United Airline tickets or Marriott Hotel stays, etc. This probably only applies to business travelers, but again it is something to consider.
Outside of those types of situations, it makes more sense to focus more on the Sign Up Bonus and not get distracted by if a Credit Card earns 1 mile per $1 spent or 1.25 miles per $1 spent.
Time To Spread Your Wings
Hopefully this lesson has helped you get a better understanding of how to go about picking a Travel Credit Card.
Now that you are armed with the knowledge of how to select a new Card it is time to spread your wings and fly, literally!
Check out the Best Current Credit Cards Page, and sign up for a new Travel Credit Card.
The Cards are ranked in order of what I think are the current best offers and is updated constantly.
Once you realize how easy it is to earn miles with Credit Cards, your life will forever change as you realize that Once In A Lifetime Trips, can easily become Once A Year Trips that are free!
As always, I am here to answer any questions big or small. From help deciding between 2 credit cards or questions about how to fill out a credit card application, you can always email me at FrequentFlyerUniversity@gmail.com with any questions, and I would be more than happy to help guide you.
At the end of the day, my one goal of Frequent Flyer University is to help everyone travel more, preferably at little to no cost!
