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What You Need to Know About Travel Rewards Credit Cards

If you’ve gotten a signup bonus offer in the mail that could pay for your summer vacation or just like the general perks, you may be considering adding a travel rewards credit card to your wallet. For a frequent traveler, these cards can provide better rewards than even the best cash back credit cards. However, there are a few things you need to be aware of.

Not all miles are created equally

If you get signup offers of 50,000 bonus miles or 100,000 bonus miles, you may automatically assume that the 100,000-mile offer is the better deal. However, unlike with cash back cards where you can easily compare the cashback percentage, travel miles are not so easy to compare. First, you need to figure out how many miles you’ll get per dollar spent. Then, you’ll have to figure out what the miles will be worth when you cash them out. It may turn out that the card offering less miles actually makes miles easier to earn and gives you more when you redeem them.

It may travel, but will it be accepted?

For travel within the United States, you can safely assume that your card will be widely accepted subject to the usual handful of businesses not taking American Express or Discover. If you’re traveling abroad, you need to make sure your card meets the standards of the country you’re traveling to. Most foreign countries no longer use the magnetic strip technology still used in the United States. If that is the only way you can swipe your card, you will likely be unable to use it outside of major tourist centers.

To be sure your card will be accepted abroad, you’ll need to get a card with EMV chip technology. These cards contain a small computer chip that is inserted into a reader. To be safest, try to find a card with chip and pin technology. These cards function similarly to debit cards in the United States and are widely accepted abroad, but few banks issue them. The next best alternative is a chip and signature card. Most U.S. banks now have them available upon request, but they may not be accepted at fuel pumps, train ticket machines, or other unattended locations.

Your miles are worthless if you can’t use them

Travel miles can be redeemed in one of two ways. Either you can request a statement credit for travel-related expenses after your trip or you convert your miles into frequent flier miles or hotel nights before you book your travel. Either way, you’ll need to collect thousands of miles before you can redeem any awards. If you’re a light spender or infrequent traveler, you may never reach the redemption threshold and effectively turn your card into a no rewards card. Your miles are also use it or lose it — if you ever decide to change cards or your account is closed, you will lose all the miles you had saved up.

Watch out for the fees

The best travel rewards cards can have some of the highest annual fees among all credit cards. For frequent travelers, the benefits the cards provide might be well worth it. Occasional travelers should carefully review any offers and decide if the reward value after the annual fee would outweigh what they would get with another card. International travelers should also be aware of foreign transaction fees and currency exchange fees. Some travel cards charge them, and some don’t. If they do, and most of your travel will be abroad, the fees may eat up most of your rewards earnings.

The real value may be in the perks

For many travel rewards credit card holders, the miles aren’t the main reason to have the card. Some travel cards provide special privileges such as airport lounge access, free checked bags, or early boarding. These perks can make flying much more enjoyable, and even if the card has an annual fee, the cost will likely be far less than paying for those services directly.