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Travel credit cards are a popular recommendation for people who love to travel, and for good reason. You can use your card to earn travel points, and then use those points to save on your trips.
But travel cards do have a bit of a learning curve, as using travel points isn’t as straightforward as using cash back. Because it’s more complicated, there are also more ways that using travel points can go wrong. If you have travel points, or you’re thinking of getting a travel card, you should know about some common mistakes that could cost you.
1. Transferring travel points without a scheme
Some travel cards offer transferable points. That means you can send your travel points to the loyalty program of any airline or hotel partnered with your card issuer.
Let’s say you have 100,000 Chase Ultimate Rewards points. Those are transferable travel points, and Chase is partnered with over a dozen airlines and hotels. You could transfer those points to United, turning your 100,000 Chase points into 100,000 United miles. Then, you could book airfare on United with those miles.
Transferable points are great, because they give you a lot of flexibility in what you book. Here’s where people go wrong: They transfer points before deciding what they’re going to book. Transfers are final. After you transfer your points, they can’t be transferred back.
So, if you’re going to transfer Chase points to United, look for an award ticket on United first. Once you’ve found it, transfer only the points you need to book that ticket. Otherwise, you could end up with miles that you won’t use.
2. Redeeming them for cash back
Travel points are worth the most when you use them for travel. Many rewards programs will also let you use them for cash back, but at a much lower value.
If you can get $0.015 to $0.02 per point with a travel booking, you may only get $0.006 if you use those points for cash back. With 100,000 points, that’s the difference between $1,500 to $2,000 in value compared to just $600. Unless you really need the money, or you have more points than you know what to do with, stick to using points for travel.
3. Using them to pay for online shopping
Some credit cards give you the option of paying with points while shopping online. You may be able to use your points for Amazon purchases or when going through PayPal checkout.
The problem here is the same as when you use your travel points for cash back. You get a much lower value for your points — in fact, it’s often the same value you get on cash back redemptions. It may seem exciting to spend less for an online order by paying in points. But you’re getting pennies on the dollar if you do.
4. Hoarding them
It’s not hard to earn lots of travel points. Many cards offer impressive sign-up bonuses of 50,000 points or more. You’ll also be earning points on purchases you make with your travel cards. If you’re a big spender, or you’re good at maxing out your rewards through bonus categories, you could end up with quite a few points.
Make sure you’re using those points you earn. Some people hoard points, either because they want to save them for later or because they don’t travel enough to redeem all of them. Your points aren’t saving you any money if they’re sitting around unused.
As a general govern, aim to use travel points within a year or so of earning them. If you can’t because you’re not traveling enough, cash back credit cards may be a better choice.
5. Overspending to earn them
One of the dangers of earning points is that it incentivizes spending money. You may find yourself rationalizing purchases with the excuse that “I’ll earn more points” or “My travel card earns bonus points in this category.”
On regular spending, most travel cards earn 1% to 2%. In bonus categories, some of them may earn 3% to 5%. If you make a $100 purchase for the points, you’re not coming out ahead. The points you earn may save you $5 on travel in the future, at most. That’s still $95 less than you would have saved by not spending that money. Stick to your regular spending habits, even when you’re earning travel points.
When used correctly, travel rewards cards can help you travel for much less. If you avoid those mistakes, you’ll be able to make the most of your travel points.
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