Editor’s note: This story refers to travel as it was at the height of the Covid-19 pandemic in 2020, when lockdowns and travel bans were in effect in most of the world. Since then, travel has largely returned as vaccination rates rose, and it makes sense again to consider travel credit cards — including our top recommendation as of July 2021, the Chase Sapphire Preferred.
The coronavirus pandemic has decimated the travel industry.
At one point, daily air passenger totals dropped to numbers we haven’t seen since the Eisenhower administration. Even if you want to travel, not much is open right now and the possibility of future lockdowns is real.
All of this bad news may have you reconsidering the value of having a travel credit card. But before you stuff your travel card in the sock drawer next to your “I Like Ike” campaign pin, consider the opportunities.
Travel card issuers have moved quickly to adjust the benefits they offer. Right now, many travel credit cards are offering temporary perks, such as the ability to earn bonus points in different categories, says Benet Wilson, senior credit cards editor with The Points Guy (which is owned by NextAdvisor’s parent company, Red Ventures). And many of these bonus categories line up with essential expenses, like groceries, making it easier to earn travel rewards.
At the same time, travel providers are fighting for the business of the few travelers that remain. This has created a perfect storm of sorts, where you may find it easier to earn and use your travel rewards than in the past. So for some, there is an opportunity to take a chance on booking travel for 2021. There’s a lot of award availability and cheap hotels, says Matt Kepnes, travel author and founder of the travel site Nomadic Matt. You can find a lot of deals right now, and if you’re going to book any travel, be sure it’s refundable, he says.
But whether a travel credit card makes sense for you in 2020 depends on your personal situation. A straightforward cash back card may be a better option based on your goals. And if you’ve found it difficult to stay out of credit card debt, then a debit card or prepaid card may be a better choice. There’s never a situation where the value of credit card rewards will outweigh the interest you pay on a credit card balance.
How to Use Your Travel Credit Card in 2020
The travel rewards landscape — much like the travel industry as a whole — has changed a lot this year. Card issuers have added perks and bonuses for popular purchase categories, such as delivery and streaming services.
Most of these benefits are only temporary though, so if you plan on taking advantage of them pay attention to when they expire.
Take Advantage of Temporary Credit Card Perks
Most of the new temporary benefits being offered for certain travel cards fall into two categories: increased rewards-earning rates and statement credits that can be used to cover qualifying purchases.
Depending on the credit card you have, the temporary perks are available for purchases made for groceries, dining (sometimes including delivery services), gas, streaming services, cell phone services, and home improvement stores. For example, the Chase Marriott cards normally offer one to four points for every dollar spent on purchases at gas stations or restaurants. But now through Oct. 31, 2020, many of the same cards offer 10 points per dollar spent on those same purchase categories.
Some premium travel cards offer rewards in the form of statement credits that can be used to cover travel expenses. If you have one of these cards, many issuers have expanded what purchases qualify for the credit to include non-travel categories. The Chase Sapphire Reserve® comes with an annual $300 credit that applies to a wide range of travel purchases. You just pay for something like a flight or rental car, and you’ll be automatically reimbursed for the first $300 in purchases. Chase expanded this credit to also apply to gas station and grocery store purchases through the end of 2020.
And other cards have gotten brand new credits. The Platinum Card® from American Express comes with two monthly credits up to $20 each (up to $40 total) through the end of 2020, one for U.S. wireless phone services and the other for select U.S. streaming subscriptions.
The exact bonuses, and how long they are valid for, vary by bank and card. So contact the card issuer if you’re not sure what temporary deals are available for the cards you have.
Earn Transferable Rewards
The value and usefulness of miles and points depends on the rewards program. So if you’re banking points for future use, make sure you’re participating in earning rewards you can actually use. The best cards now are the ones that offer transferable points, Kepnes says. Wilson echoed this sentiment, saying transferable points are a much more strategic option than earning miles attached to a single airline.
Most banks — such as Chase, American Express, Citibank, and Capital One — have loyalty programs that offer points or miles that are transferable to other programs or various airlines. So you can transfer any earned points or miles to different hotel or airline partners, giving you more award travel options. You can also usually redeem transferable points for statement credits toward certain expenses or gift cards. So if your situation changes, and travel isn’t a priority anymore, the points you earned won’t be worthless.
Not having all of your loyalty rewards in a single program has other advantages, too. Airlines change what cities they serve all the time, and shutdowns caused by the pandemic have made flight schedule adjustments more erratic and uncertain. And there’s no guarantee you’ll keep your miles if an airline files for bankruptcy. But when you can move your credit card points to a dozen frequent-flyer programs you minimize the risk of airline route changes or bankruptcy impacting your plans.
And another thing to consider: every airline has different award prices, partner airlines, and program rules. Two airlines may serve the same city and charge two different prices to get there from the same origin. Some airlines even allow you to add in a free stopover (i.e., a connection of 24 hours or more) on your award ticket. For example, if you’re flying from the east coast to Asia you may be able to visit a connecting city in the west coast for a few days before continuing on to your final destination. So being able to choose what airline miles you use gives you the chance to cherry pick the best fit for you.
Book Cheap, Refundable Travel for Next Year
One of the most valuable travel rewards hacks is to book international business- and first-class flights with your points. Let’s say you have 100,000 miles saved up, which can be worth anywhere from four to five round-trip domestic flights. Those flights would typically cost anywhere from $500 to $1,500 if you paid cash.
You could also potentially use those same 100,000 miles to book an international business-class flight, which can easily cost $3,000 to $5,000 — or more. The problem with this option is that business-class award flights have traditionally been much harder to find and book. But many premium award flights are currently much easier to find than before. Most airlines allow you to book award flights roughly a year in advance, so now could be an ideal time to book a trip for next summer or fall.
Of course, booking any travel right now comes with a few caveats. We don’t know how long the pandemic is going to last, U.S. citizens can only go so many places, and the world is not opened up to us yet, Wilson says. Kepnes has a similar caveat. Even if you find an airline selling tickets to Thailand, it doesn’t necessarily mean it will be open. They’re just hoping it will be open. So make sure you’re booking only fully refundable travel.
If you want to cancel a card because it has an annual fee, first call the issuer and see if you can get the fee reduced or waived.
Should You Cancel Your Travel Credit Card?
If your travel card has an annual fee and you’re not getting value out of the card, your first instinct might be to cancel it. But canceling a credit card isn’t the only way to avoid paying the annual fee, and depending on your situation it might not be the best way. Canceling a credit card could have a negative impact on your credit score. So it’s best to look into other ways to avoid paying the annual fee without canceling before you cut up the card.
Before closing your card, call the issuer and let it know you’d like to cancel because of the annual fee. Ask if they can waive or reduce the fee. You should also ask specifically if there are any retention offers for your card. Sometimes card issuers may not waive the annual fee and instead will entice you to keep the card with these targeted deals.
Typically, a retention offer will require you to meet a spending requirement within a certain period of time to earn a statement credit or bonus rewards. For example, you may be offered a statement credit to offset your annual fee if you spend $1,000 within the next three months. These deals make sense only as long as it doesn’t encourage you to spend more than you normally would.
If the card issuer won’t budge on the annual fee you may be able to do what is known as a product change and switch your annual-fee card to one that has no annual fee if that’s an option. Whether a product change is allowed varies by bank and even depends on the specific card, but it’s worth calling and asking about. Also, in the future when you’re traveling again if you want to switch back to your original travel card you can usually do that.
When you complete a product change your account history for that card stays the same on your credit report. This can help your credit score by maintaining the age of your accounts and keeping your payment history for the long term. On the other hand, if you cancel your card, the account will typically be removed from your credit report after 10 years.