What are Credit Card Travel Rewards and How Do They Work?

Truth be told, I’m not sure whether I get more satisfaction from collecting credit card travel rewards or spending them. It’s exciting to watch my points pile up month after month as I start anticipating my next vacation.

But when I finally redeem them and fly for free, I’m definitely all smiles. So, I think it’s a tie!

Credit card travel rewards come in the form of points or miles you can earn on eligible purchases. You can often turn those points into flight tickets, hotel reservations, or rental cars. Most programs with travel rewards include some extra benefits, too. You may get access to airport lounges, travel insurance, and priority services that can enhance your travel experience.

Credit card travel rewards are points or miles earned on purchases that can be redeemed for travel-related expenses like flights, hotel stays, and other perks.

I know plenty about travel rewards, so I can walk you through exactly how they work, what kind of perks you can access, and offer you a few tips on how you might pick the right travel rewards card. Whether you’re a seasoned pro or just starting out, these rewards will help you get more bang for your buck.

Let me tell you, more credit cards are handing out travel rewards than you can shake a stick at. You can use those rewards to help offset the cost of travel, but if you want to maximize their value, you really need to know how to earn, redeem, and stretch those points or miles as far as you can.

Earning Points or Miles 

Building up rewards is easiest by using your card for buying everyday stuff. Most times, for each dollar you spend, you get a certain number of points or miles based on the card’s earning rate.

A lot of travel credit cards give you higher earning rates when you spend money on travel, eating out, and other particular categories. The more you use your card, the faster your rewards could add up.

There are additional benefits with some travel cards. One card may let you earn double points on travel-related spending such as airline tickets, hotel stays, and rental cars.

New cardholders may receive bonus points by spending a set amount within the first 90 days of opening up the account. These will increase your rewards balance and bring you closer to your travel goals faster.

Redemption Options

The points or miles you rack up from your travel rewards card can be cashed in through your card issuer’s online portal. Most often, that portal provides several ways to spend them, like paying for hotel stays, flights, rental cars, and sometimes even gift cards or other goodies.

Your options can be all over the map. Co-branded rewards tie you to specific airlines or hotels. At the same time, general-purpose points give you more room to maneuver and may even let you snag some cash back. Understand what your card offers so you can squeeze the most out of those hard-earned rewards.

Transfer Partners

One of the cool things about many travel rewards cards is the ability to transfer your points or miles over to partner airline or hotel programs. If your card isn’t shackled to one airline or hotel chain, you can shift those points into a partner’s loyalty program and use them for bookings there.

Transfers frequently extend your rewards further. This is most often done through your card issuer’s online or mobile portal. When you transfer points to the frequent flyer program of an airline, you may book flights directly with the carrier, sometimes for fewer points than you’d spend through the credit card’s travel portal. This means more bang for your buck.

For instance, in order to transfer Chase Sapphire Reserve points to an airline loyalty program, you’d need to log into your Chase account either through the Ultimate Rewards portal or the Chase app. From there, scroll down to “Transfer Points.”

You then select the airline loyalty program that you’d like to transfer your points to. Chase has loads of partners, including United MileagePlus, British Airways Executive Club, and Air Canada Aeroplan.

You’ll enter your loyalty account number and select how many points you want to transfer. For the Sapphire Reserve, you transfer points at a 1:1 ratio, meaning one Chase point equals one point or mile in the airline’s program. Verify the information and click “Submit.”

Just make sure it’s worth moving those points! Sometimes, redeeming Chase Sapphire Reserve points directly for travel yields 50% more value, so it may be worth taking a gander at the math to see which way you come out best. Usually, the points transfer instantaneously, but it may take a few days, which may be a hassle if you’re trying to travel soon.

Travel reward credit cards have many benefits that can go a long way in making your trips more comfy and cozy. These include free or low-cost travel to many places, various upgrades, and insurance options, giving you solid protection from worst-case scenarios.

Most of these benefits are easy to understand and assure you that you grab full value from your rewards.

Free or Discounted Travel

One of the major reasons to get a travel rewards card is to score free flights or hotel stays. With each purchase, you earn points or miles that go toward paying for your travel. Even better, some premium cards offer a signup bonus large enough to get a round-trip plane ticket or a few nights in a hotel.

Some credit cards offer signup bonuses that could cover the cost of a flight or hotel stay.

Besides that, travel rewards cards can save cash by letting you pay with points or miles instead. This reduces the overall costs of your trips and makes travel much more budget-friendly.

For example, if a certain flight costs $500 but you have enough points to cover it, then you can book the flight without spending a dime out of pocket.

Perks and Upgrades

Most travel rewards cards offer a set of perks that make your travel considerably enjoyable. These may include lounge access and priority check-in. Lounges let you sit and have some quiet time before taking off. Many of them provide free food, delightful cocktails, and even wifi.

Then, there are reimbursements for priority services — including Global Entry and TSA PreCheck — that quicker check-in, screening, and boarding that help reduce your travel hassles. Many of these cards also provide free upgrades and special discounts. You may be able to snag a free room upgrade at a hotel or enjoy discounts on car rentals. 

Popular cards like the Capital One Venture Rewards Credit Card offer access to airport lounges across the globe. The Hilton Honors American Express Aspire Card can give you Hilton Honors Diamond Status, complete with upgrades and lavish perks.

I’m currently at the Gold Status level and will hopefully ascend into the heavenly Diamond realm someday.

Insurance and Protection

Travel rewards cards may also have excellent insurance. This may cover headaches such as trip cancellation, interruption, or delays. For instance, if you need to cancel a trip due to specific unforeseen reasons, trip insurance helps you get back some costs. 

Some cards provide purchase protection and extended warranties. Purchase protection covers items that you buy using the card against accidental damage or theft. Extended warranties provide extra coverage above what the manufacturer’s warranty calls for on eligible items. These protections are great for any peace of mind you can muster.

For example, the Chase Sapphire Reserve® may extend trip cancellation and interruption insurance. Notice that many of the best travel cards provide you with protective benefits beyond those just for travel.

Travel rewards credit cards come in all stripes: co-branded airline and hotel cards or general-purpose ones that let you use points across different brands. Let’s look at each below.

Airline Co-Branded Credit Cards

Airline co-branded credit cards are directly affiliated with one airline. You earn points or miles that go directly into that airline’s frequent flyer program. Sticking with that airline means getting faster rewards. Cards with higher annual fees come with added perks, such as getting to board earlier, having your luggage checked for free, or relaxing in an airport lounge before taking off.

The value of such rewards will vary with the airline’s frequent flyer scheme. Things like when you’re flying, where you’re going, and what seat you’re stuffing yourself into all play a role here. Remember, an airline can change its plans at any minute, meaning the value of your points may go up or down.

These can be very useful cards if you generally travel on the same airline. They help you utilize every facility to its fullest and travel as smoothly as possible. But if you like to jump between airlines, these are not as useful.

It’s wise to monitor any changes the airlines make to their frequent flyer programs. This will help you access more card value and plan your travel schedule.

Hotel-Co-Branded Credit Cards 

Co-branded hotel credit cards tend to keep you locked down in a particular hotel reward ecosystem.

You can redeem these rewards for free stays at that chain and, if you’re lucky, maybe score additional benefits like room upgrades and free breakfasts that will make your hotel stays a little more pleasant.

With co-branded hotel cards, you earn bonus points or miles on spending at that hotel chain, in addition to the standard rewards you get on everyday purchases.

You can use those points to add a little extra comfort to your travels with the amenities that come along with staying loyal to that hotel chain.

General Purpose Travel Rewards Credit Cards

General-purpose travel rewards credit cards offer more flexibility than co-branded cards. The rewards earned with these cards can be used across various airlines and hotels, making them ideal for travelers who do not have a preferred carrier or hotel chain. 

These cards usually include various redemption options (including statement credits), allowing you to apply your rewards to a wide range of travel-related expenses.

In addition to travel-related redemptions, general-purpose travel rewards credit cards often allow you to redeem points for cash. This feature provides added flexibility, as you can also use your rewards for non-travel-related expenses. 

Unlike co-branded cards, these cards are not tied to a specific frequent flyer program for an airline or hotel chain, giving you more freedom in how you use your points or miles.

These cards are perfect if you value freedom of choice and want to maximize your rewards across different travel providers. By selecting a general-purpose travel card, you can enjoy a wide array of redemption options and wring the most out of your travel rewards.

The rewards card you choose will make a big difference in the way you travel and how much you can save. To get the right one, you have to match the card with your spending habits, then factor in fees and possibly signup bonuses.

All these considerations will help you find a card that may yield you the best benefits and fit your travel goals like a glove.

Understand Your Spending Habits

The first step in picking a travel rewards card is matching it to the typical ways you spend money. Consider all your monthly expenses: groceries, dining, travel, gas, edibles, and so forth. You’ll get the most out of a card if it gives you bigger rewards in those categories where you spend the most.

You may want a card that gives higher rewards for dining purchases if you eat out a lot. You’ll earn the most points when you select a card that fits your spending habits. 

You also want to look at other benefits that match your lifestyle. If you spend a lot on travel, something like the Chase Sapphire Reserve® lets you take full advantage of a getaway after earning a yearly travel credit. Picking a card that fits your spending habits means you get an excellent return on money without enduring the risk of, say, a cryptocurrency speculator.

On the other hand, being aware of your spending habits will help you shun cards that are not suitable for your needs. If you don’t travel that much, then a card offering rewards on travel expenses probably won’t help you as much as a no-annual-fee cash back card.

Look at Annual Fees and Costs

You always want to weigh the rewards of any potential travel rewards card against its fees. High-annual-fee cards often boast big rewards and perks that seem to justify their costs.

You’ll also want to compare the foreign transaction fees and interest rates. If you travel internationally, a no-foreign-transaction fee card will save you about 3% on purchases made outside the U.S. A great example is the Capital One Venture Rewards Credit Card, which does not charge foreign transaction fees. 

Then there’s the interest charge to consider. If you carry a card balance, you want to search out lower interest rates to keep your costs down. Better still, pay off your balance in full every month to avoid interest that’ll eat into your rewards faster than a pig at a slop trough. 

Identify Signup Bonuses

A signup bonus can turbocharge your rewards balance, so figure that into the equation, along with the spending requirement. Most of the travel rewards credit cards offer very generous signup bonuses if you can spend a minimum amount within the first three months after opening the account.

Seriously consider the value of the bonus and how that will help you with your travel goals. It’s a savvy move to work out how much those bonus points or miles are worth and how you can redeem them. Be sure to check for any extra benefits if you redeem your points or miles through the card issuer’s portal.

You will also want to compare your usual amount of spending to the purchase requirement for the signup bonus. Some cards have big spending requirements, and these can tempt you into overspending. That messes with an otherwise blessed budget. Your best bet is to pick a card with a spending requirement that you can meet without changing your normal habits (assuming they are normal).

And finally, look for the 0% APR promotions or temporary deals that come with the signup bonus. It may blow your mind when you discover how much you can boost your finances with a nice, chunky bonus paired with 0% APR for 15 or 18 months on purchases and balance transfers.

When juggling these thoughts, you should be able to pick a travel rewards card that matches your spending and travel habits while making the most of the signup bonus.

Everyday purchases with a travel rewards card can become lifelong memories. When you use your card strategically, you rack up points or miles. These are a legit currency you can trade in for free flights, hotel stays, and other travel perks that lower the overall cost of your trip and make travel easier on your wallet.

The best travel reward cards offer you so much more than just saving money. They can make trips smoother via access to airport lounges, priority boarding, free upgrades, and travel insurance. Top-shelf cards make the journey more relaxed and comfortable.

Other benefits, such as purchase protection, can take some of the stress off while you’re abroad. A good card will give you more travel for less money and save you money en route with really nice perks. 

Whether you often find yourself buckled into an increasingly cramped airplane seat or hardly ever take to the air, these cards can make a big difference in travel across the United States or around the world. Understand your spending habits, weigh the costs against the benefits, and pick a card that fits your lifestyle.