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Travel Reward Credit Card -
Should you get a travel reward credit card or cash
back credit card for free
By Nick Lian
Travel or Cash Back
Credit Cards?
If you want to use a reward credit card for getting free airline
tickets, you have a choice of choosing a dedicated airline credit card,
a travel reward credit card or a cash back credit card. A dedicated
airline credit credit card has hefty annual fees and may not be worth it
if you are not a very frequent traveller or spend enough on your credit
card. So should you get a no annual fee travel reward or cash back
credit card to earn your free airline ticket?
This articles explains how you should go about making this decision.
Let is assume we now have one reward credit card and one cash back
credit card to choose from. The reward credit card pays one point for
every dollar you spend on purchases. The cash back credit card pays a 1%
rebate. Essentially, they both have identical payout formula of 1%. Let
us assume both have no annual fee (very realistic) and both have
identical apr.
Would there be any difference between the two credit cards? Should we be
indifferent? How do we decide which is better? How much does your
typical vacation airline ticket cost?
The most important factor that in this decision is actually the average
cost of your airline ticket when you take your vacation. Why?
Because most travel reward program (in fact, most frequent flyer
program) require that you earn 25,000 miles or points to redeem a
roundtrip restricted economy ticket within continental US. You are
required to purchase the ticket either through the specific airline
directly (in the case of a specific frequent flyer program) or through
the reward program's agent.
If you have a cash back credit card, 25,000 points will get you a $250
cash rebate (assuming a 1% formula). But we all know that a domestic
economy ticket cost can vary anywhere from about $99.00 to $350.00. If
you are flying short haul, you can get a $99.00 ticket from a low cost
discount carrier. If you fly from coast to coast, you are likely to have
to folk out over $300 for a ticket. If you use get a special deal from
expedia or priceline, you may get it cheaper.
Choose a cash back credit card if you airline ticket cost less than $250
Hence, it is very important to know your vacation habits. Where do you
tend to go for your vacations? How much does your average airline ticket
cost you? If you tend to fly short haul to a nearby place for your
vacation and your airline ticket cost about less than $250 (say for
example $150), you are better off using cash rebates from a cash back
credit card.
This is because you only need to spend $15,000 on your credit card to
get a $150 cash rebate. Spending $15,000 on a reward credit card only
earns you 15,000 points, not enough on most reward program to earn a
free domestic economy flight. Choose a travel credit card if your
airline ticket cost more than $250.
However, if you fly long distance (New York to LA for example) and your
airline ticket tends to cost over $300, then using a reward credit card
makes more sense. This is because if you use a cash rebate credit card,
you need to earn over $300 in cash rebates (ie spend over $30,000).
However, with a regular reward program credit card, you only need to
spend $25,000 to earn your 25,000 points.
So if you tend to take vacations that require long haul flights that
cost more than $250, use a travel reward card. If your vacation flights
cost less than $250, use a cash rebate credit instead. Some reward
program only require 22,000 points to redeem a domestic roundtrip
flight. In that case, use $220 or 22,000 points as your guide when you
are choosing between a travel or cash back credit card..
About the author: Nick Lian
http://www.compare-apply-credit-card-online.com Credit card tips,
news and reviews for those looking for a credit card.
Also see the resources on "Travel
Reward Credit Card".
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