A travel reward credit card can be a great tool if it used correctly. Unfortunately, many people do not use the cards correctly and end up in dire financial straits. As with most credit cards, the banks are actually 'banking' (pardon the pun) on the consumer to make mistakes, and thus pay them a lot of money in interest.
To avoid becoming a casualty of the travel reward credit card, don't make any of these four mistakes:
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Getting A Card You Don't Want!
Not everyone considers travel the most important reward they can receive from a credit card. Many credit card companies offer all kinds of reward options, from groceries and gas to consumer electronics, movie tickets, and cash back. Think carefully on what kind of reward you would like to receive from your credit card before opting for a travel reward credit card.
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Not Checking The Purchase to Points Ratio!
Some travel reward credit cards only offer one air mile for every two dollars spent. That means in order to generate enough miles for an average domestic ticket, you need to spend up to $50,000 on your card! Many of those domestic tickets can be purchased for as low as $400.00, so the advantage is really very small. Of course, if you are a disciplined user of the travel reward credit card, then any points gained are truly 'free', so it is worth it. Luckily for the banks, most people aren't. Make sure that you can spend enough money on the card to make it worth it.
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Not Paying Attention to the Annual Fee!
Most decent travel reward credit cards ask for an annual fee. This can be substantial, especially considering that many credit cards have no fees these days. Some travel rewards cards also offer no annual fee, but the purchase to points ratio is generally poor, and the interest rates high. Also, many cards offer a 'first year free' option, but then the fee kicks in for subsequent years. Depending on the amount you use the card, you could end up paying for many years before making enough for a single flight.
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Not Calculating The Interest Rate!
In order to make the cards effective, the banks often charge higher interest rates on their travel reward credit cards. Sometimes this is hidden, as in the interest rate kicks in at a higher percentage after a period of time, or particularly if a payment is missed. Read all the fine print before signing up for a travel reward credit card.
By avoiding these four common mistakes you can put your travel reward credit card to good use. Used correctly, a travel reward card is a fantastic tool for building up points and working toward your travel dreams.
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