Are Travel Credit Cards Worth It?

If you’ve ever wanted to travel like “the other half,” a travel rewards credit card can be the key to opening up an unparalleled world of luxury travel opportunities. Between the perks and value of travel rewards, these cards can make traveling in style much more attainable than your average cash back credit card. 

Travel rewards cards typically earn more points on travel purchases and everyday spending categories like restaurants and supermarkets. They also provide valuable purchase and travel protections, giving you extra peace of mind and saving you money on travel insurance).

Over the past 12 years, I’ve saved thousands of dollars on travel expenses, either by redeeming points from my travel rewards cards or by taking advantage of their travel protections. It’s why I keep paying the $95 to $595 annual fees on these cards — for me, the benefits far outweigh the costs. But that’s not the case for everyone. 

Many travel rewards cards have high annual fees and benefits that may be hard to maximize depending on how you travel. To help you figure out whether travel credit cards are worth it, we’ve put together this comprehensive guide. Here’s everything you need to know to decide between travel credit cards vs. cash back cards:

Travel credit card user vs. cash back card user

Travel credit cards provide tremendous flexibility and value. The points from these cards can usually be transferred to airlines and hotel programs, or they can be redeemed towards travel purchases and cash back.

With cash back cards, you can redeem rewards for anything: Statement credits, purchases or travel expenses. The downside? The rewards are worth a set amount, without the option to transfer them to airlines and hotels for elevated value. There are exceptions, but this is generally the case. 

That being said, cash back has numerous advantages. You’re not restricted to redeeming your credit card rewards with a limited set of transfer partners. You’re also not limited by blackout dates and award inventory restrictions. The ability to redeem your cash back for any expense (travel or otherwise) is hugely beneficial. In some cases, it even works out more favorably than redeeming points.

To give you a better idea of which card type might be best, let’s consider the average American’s spending habits. The average annual expenditures for Americans in 2023 was about $77,280 in expenditures, according to the Bureau of Labor Statistics (BLS) Consumer Expenditures report. Of this amount, let’s say around $28,101 could reasonably be charged to a credit card. 

If you put these expenses on a 2 percent cash back card like the Wells Fargo Active Cash® Card, you’d earn $562.02 in rewards. 

Putting these expenses on a popular travel rewards card like the Citi Strata Premier℠ Card could generate 53,711 points. These points are worth just $537.11 when redeemed as cash back or statement credits. However, if you transfer these points to a Citi ThankYou transfer partner, you can get much more value out of your rewards. At the time of writing, here are some transfer partner deals you could snag based on your available points:

• Air France/KLM Flying Blue: A one-way business class ticket to Europe.
• Turkish Miles&Smiles: Three one-way economy class tickets to Hawaii on United Airlines.
• Virgin Atlantic Flying Club: Up to five one-way economy class flights between the East Coast and London. 
• Wyndham Rewards: Up to seven nights at a Wyndham hotel property.

Citi frequently offers transfer bonuses to partners like Virgin Atlantic Flying Club and Flying Blue. So you can redeem fewer points and stretch your rewards further. If you’re keen to do the legwork, then a travel rewards card can help you stretch your rewards further. However, if you prefer to use your rewards at a flat rate, then a cash-back card is king. 

Most valuable travel card benefits

Ideally, a travel card’s rewards and benefits would make up for the annual fee. But Garrett Yarbrough, a credit cards expert and writer at Bankrate, stresses the importance of actually using your benefits:

After years of reviewing and using credit cards, Yarbrough recommends looking for cards with complimentary airport lounge memberships, travel credits, travel insurance and expedited airport security screening service credits.

Here’s a look at some of the most valuable travel card benefits you can find on the market:

• Rewards in the form of points or miles
  

  The main idea of a travel credit card is that you earn points or miles on purchases you make with the card. You can use these rewards to book flights, hotels and rental cars. Travel cards usually offer a higher earn rate on travel purchases, especially when booking through the issuer’s travel portal.

  Points or miles are generally worth the most when redeemed with the issuer’s best transfer partners. They may be worth the least when redeemed for non-travel purchases.

   

• Large welcome bonuses
  

  Travel rewards credit cards generally offer higher welcome bonuses than cash back cards.

  For example, the Chase Sapphire Preferred® Card currently offers a Chase Travel℠ credit worth up to $300 and 60,000 bonus Chase Ultimate Rewards points after spending $4,000 on purchases within the first three months of account opening. Meanwhile, a Chase cash back card like the Chase Freedom Flex®* offers just $200 cash back after you spend $500 in the first three months. Granted, this card has no annual fee and a bonus that’s easier to achieve, but the Sapphire Preferred’s $95 annual fee and higher spending threshold may be worth it for a better bonus.

  Some savvy cardholders earn and use that welcome bonus to pay for their next vacation. Just remember that getting a welcome bonus is not worth overspending and going into debt. But, it can be a smart move to redirect certain expenses to the new card or make a big pre-planned purchase during that time frame.

• Airport lounge access
  

  Many premium travel cards come with access to airport lounges, either with a specific card issuer lounge or with an airline lounge (or both). These are luxury spaces to wait out a long layover while enjoying food and drinks.

  “Airport lounge access and expedited airport security can help save your sanity and several hundreds of dollars, even if you only use them a few times a year,” Yarbrough says.

   

• Travel insurance
  

  If you experience flight delays, lose a checked bag or have another travel mishap, credit card travel insurance can save the day. Most credit cards offer travel insurance, but the more premium the travel card, the better the coverage — something that Yarbrough and I both value immensely.

  “The sheer peace of mind and potential value in an emergency can make benefits like trip cancellation and interruption insurance, trip delay insurance [and] baggage reimbursement worth their weight in gold,” says Yarbrough.

  Three years ago, I was able to save over $1,300 through my credit card’s trip cancellation and interruption insurance. I had used The Platinum Card® from American Express to buy a nonrefundable airline ticket for a family member. When he came down with COVID and was unable to travel, I got the airfare cost reimbursed by American Express after providing a doctor’s note and other required documents.

  A few months later, my card’s auto rental collision coverage helped me recoup $3,241 in damages for a rental car accident. If I’d used a cash back credit card, I would’ve missed out on these valuable benefits since most of them lack or only offer pared-back versions of these benefits.

• Global Entry or TSA PreCheck credits
  

  TSA PreCheck is a trusted traveler program that lets you access a dedicated security lane at participating U.S. airports that’s faster and lets you keep your shoes and a light jacket on. Global Entry is another trusted traveler program, but this one lets you speed up the re-entry process from another country back to the U.S. 

  It costs $120 to apply for Global Entry and up to $85 to apply for TSA PreCheck. Many travel cards will reimburse your application fee with a statement credit, including:

• Annual statement credits
  

  Some travel cards carry hefty fees — even up to $695, in some cases. In return, you’ll get a slew of benefits to justify the annual fee, like annual travel statement credits. Some of these credits are valid for a wide range of travel purchases. Others are limited to specific airlines and hotels.

  “Annual travel credits are among the best perks on the market,” Yarbrough says. He’s in favor of general use, not brand-specific, travel credits.

  “Credits that don’t require you to use a specific airline or hotel brand can offer more personal value since they won’t require you to adjust your travel plans,” he explains. 

  Some cards that offer annual statement credits include:

• Annual free hotel stays
  

  Some travel credit cards offer annual free night awards. Some of these free nights are restricted to specific point ranges or hotel categories. However, that doesn’t mean you can’t recoup your card’s annual fee from this perk.

  For example, I gladly pay the $95 annual fee every year on The World of Hyatt Credit Card* because of the annual free night award. This year alone, I was able to save over $400 on a hotel stay in Chicago by redeeming my free night instead.

  Here’s a list of some cards that offer free hotel stays:

• Companion passes
  

  Some co-branded travel rewards cards let you earn a companion pass for use for a friend or family member who can fly with you for free — if you meet the requirements. Most of these requirements include meeting certain spending thresholds, but some of them are awarded automatically on your card anniversary. Here are some cards that offer popular companion pass options:

  • Southwest Airlines credit cards: Earn a Southwest Companion Pass after racking up 135,000 points or flying 100 qualifying one-way flights in a calendar year. The welcome bonus and points earned with the cards count toward this requirement.
  • Delta Air Lines credit cards: Receive an annual Companion Certificate upon the renewal of your card each year.
  • American Airlines cards: Earn an annual Companion Certificate after meeting a specific spending threshold and keeping your account active for at least 45 days beyond your card’s anniversary date. 

• Automatic elite status
  

  Having elite status with an airline, a hotel or even a rental car company can make your travels more comfortable and save you cash. While elite status is usually reserved for frequent travelers, several loyalty programs issue it to co-branded cardholders. Some of these cards even let you earn additional status via credit card spending. Here are just a few cards that offer automatic elite status:

Cardholders who benefit most from travel cards

Travel rewards cards are ideal for people who have good credit and pay off their balance every month. These cards tend to have high interest rates, and accruing interest will outweigh the value of your points or miles. About who would benefit most from travel cards, Yarbrough gives the following advice:

Here’s a look at the cardholders who benefit most from travel rewards cards:

Frequent travelers

People who travel often will have the chance to maximize travel card perks.

Consider the co-branded Hilton Aspire Card. It carries a $550 annual fee but comes with benefits like an annual free night, top-tier Diamond status and travel credits. A frequent Hilton traveler would have no problem justifying the annual fee.

Those who don’t travel often may not redeem the free night or tap into benefits. In fact, loyalty programs often count on this to stay profitable.

Aspirational travelers

If you’ve ever scrolled through Instagram travel posts and thought, “I want that experience — without the price tag,” then a travel credit card may be a good fit for you. You can start travel hacking and redeem points for a dream destination, first-class flight or five-star hotel stay. 

Small business owners

Small business expenses can earn a stash of points with the right travel card, especially if that card doubles as a business credit card. Plus, if you travel for work, you’d be better off with a card that makes traveling as comfortable and convenient as possible. Perks like elite status with airlines and robust airport lounge access can make all the difference on a business trip. 

Big spenders

Some travel cards offer annual spending bonuses for big spenders. Rewards could include additional levels of airline and hotel elite status, free hotel nights and companion passes. These perks can be worth hundreds, even thousands, of dollars in value every year. 

Is a travel rewards card right for you?

A travel rewards card is probably right for you if you want to — you guessed it — use points for travel. But while some cardholders can benefit from travel cards, others might be better off with one of the best cash back cards.

Here are some questions to ask when deciding whether a travel card is worth it for you:

What are your travel goals?

Are you looking to book aspirational travel, or do you prefer roadtripping and sleeping in a tent? The annual fee, luxury perks and redemption options of a travel card tend to be best for high-end travel.

Does a travel card match your spending habits?

“You can maximize the rewards you earn by picking at least one card that earns more than 1X points or miles on some of your biggest purchases,” Yarbrough explains. 

Just make sure the value of your rewards is higher than the annual fee, and that you can pay off the card balance each month. If you’re only putting a few hundred dollars a month on your travel card, then a cash back card or a no-annual-fee card might be a better fit.

What transfer partner options do you want your card to have?

You’ll usually get more bang for your buck (or rewards) by booking with one of the card issuer’s transfer partners for more than one cent per point or mile. However, not everyone wants to research award availability across multiple airlines and figure out how to maximize their points. For those folks, a cash back card might be a better option.

Are there cheaper alternatives you should consider?

Just because a card is loaded with perks doesn’t mean it’s the best option out there. For example, the Amex Platinum Card comes with luxury benefits for a $695 fee. But if you don’t maximize the benefits, you may be better off with the American Express Green Card®* for a $150 annual fee or even a card with no annual fee.

The bottom line

If you’re earning enough points with a travel rewards card and using that elite status, free night or companion pass, then it’s probably worth paying an annual fee. But if a travel card is collecting dust in your wallet or you’re overspending to earn incentives, it may not be worth it.

Furthermore, if you don’t want to learn the ins and outs of loyalty programs to figure out the most high-value redemptions, you might be better off with a cash-back card. You’ll enjoy flexibility in redeeming rewards without the steppe annual fee.

Analyzing your spending habits and travel plans will help you decide whether a travel card is right for you.

*The information about the Chase Freedom Flex®, United℠ Explorer Card, Hilton Honors American Express Aspire Credit Card, The World of Hyatt Credit Card, IHG One Rewards Premier Credit Card and the American Express Green Card® has been collected independently by Bankrate. The card details have not been reviewed or approved by the card issuers.