Avoid These 5 Mistakes When Choosing Your First Travel Credit Card
Getting a new credit card isn’t a decision to be taken lightly. Every new card makes it more difficult to manage your finances, and if you choose poorly and have to close the account later it can damage your credit score.
5 Mistakes to Avoid While Choosing Your Travel Credit Card
Make sure you choose the right card the first time by avoiding these 5 rookie mistakes:
- Failing to do the math on your sign up bonus
Virtually every travel rewards card offers some kind of sign up bonus, but is it actually worth it? Sign up bonuses typically require you to spend a significant amount of money within your first few months as a cardholder. Many cards ask you to spend as much as $6,000 in those early months.
A good rule of thumb here is that you should never be spending purely to earn the sign up bonus. If the required spending is more than you would ever spend in three months, run the other way.
The only exception to this rule is if you know you’re going to be making a large purchase in the next 2-3 months that will cover the extra spending.
- Not paying enough attention to annual fees
Most travel rewards cards also have annual fees, and these are often $100 or more. Some go all the way up to $500.
Your credit card should always save you more money than it costs. To determine how much you’ll get out of the credit card, add together any inherent benefits — like yearly travel credits or companion tickets — and the rewards you’ll earn based on your spending level. If the number you end up with is higher than the annual fee, it’s probably worth it.
There should be a clear outline of the rewards structure on the card’s website, which you can use to figure out rewards based on your current spending patterns. Some cards also offer rewards calculators on their websites.
- Not understanding which rewards will actually suit your lifestyle
Just because a credit card’s rewards look good on paper doesn’t mean they’ll actually work for your lifestyle. Many travel cards offer multiple rewards tiers for various spending categories, and if you don’t spend in the right places, you won’t reap the benefits of the travel card.
Make sure you understand exactly how you earn rewards with each card, and that you’ll actually spend money on those things. You should be able to figure this out pretty easily if you pay attention to your spending (and you should be tracking everything, especially if you’re going to get a new credit card).
- Ignoring benefit comparisons and credit card reviews
Reading everything on the credit card’s website is an important first step, but it isn’t enough. You should also look at reviews on third party websites (the company will only put the nicest testimonials on their own pages), especially if you’ve never worked with the company you want a card from.
It’s also really useful to look up comparisons between the travel cards you’re considering. These will help you assess which card is truly best for your lifestyle.
- Not knowing how your points can be redeemed
Many credit cards have strict limitations on how you can use their rewards. You may only be able to use them at certain hotels or airlines, and there may also be a minimum number of points you can redeem at one time. Some cards even have points that expire annually.
Understand the limitations of your card’s rewards program, and make sure you’re comfortable with them before you apply.