Nights are drawing out, the wind is colder every day and you already feel the lightest breath of winter on your face - autumn is here. Holidays are over, kids are back to school and all you are left with are hefty holiday bills that you somehow managed to rack up. And still, there is no reason for despair! With the cards we've selected, you can extend your holiday for another month of joy - or start collecting miles and be fully armed for the Christmas shopping or even the summer holiday ahead.
We picked up the creme de la creme of travel rewards credit cards and made them compete against each other in the vicious fight of rewards and bonuses. Take a look at our candidates and see who won in the autumn rewards race.
In order to make sure that you get the least biased comparison possible, we came up with criteria that will help you choose a card most suitable for everyday use and miles accrual. First of all, a real travel card should charge you low or no APR. You should be able to take off on holiday and pay any time later. Secondly, think about additional fees. Sometimes you may look at enticing bonuses and forget about an annual fee that can take from you right what you've gained.
However, bonuses are crucial if you want to use miles or points to pay for your holiday - they often make up a good portion of your flight ticket or cover all of it. You also need to consider the rewards rate on non-travel purchases, because this is what basically gives you miles when you are not traveling. Below you can see the comparison of cards by these principal parameters.
When it comes to your actual earnings, every detail is important. In most credit cards' offers fees and rewards counterbalance each other, and for each prospective card you need to consider what dominates. Some premium credit cards have hefty annual fees and are worth it for only those who spend the equal or more for plane tickets.
On the other hand, sometimes a card boasts low fees, but has no rewards either. Thus, it's a matter of calculation. In order to determine the card's worth to you we need to count its rewards value. We don't take into account any interest payments, because we take as a basis that you don't carry a balance and you are never late with your payments - this is the only way you can get any profit from a rewards credit card.
The rewards value is how much you are going to get back with the card, how much money you are going to pocket. To calculate it, we need to put together all your expenses per year. Since individual spending can vary, we will take average annual spending per person. We don't take expenses that don't earn rewards like mortgage, cash advances or balance transfers.
Generally during a year, you have a lot different expenses, which you can't put all in one category, so cards with a good rewards rate on all purchases and a good sign-up bonus will earn you more simply because all in all you spend much more in different categories altogether than in one selected category, even with increased bonuses. That's why in the game of rewards all expenses are important. Let's see how much an average person spends per year:
The calculation is pretty simple: we take annual expenses of an average American (the ones that earn rewards) and multiply them by the rewards rate. If the card has a bonus offer, we add it to the earned rewards. We assume that bonus offer is earned by default, as well as all expenses are put on a credit card. All calculations are hypothetical and vary depending on the credit card spendings.
With these operations you get a number in miles or points, but we need to know how much real profit you are going to get, so we divide this number by the redemption rate. Redemption rate varies, but generally it is 1 mile/point - one penny, so we take it as a rule. Therefore, dividing the sum in miles by 100 you get your rewards value in dollars.
Whenever possible, bank will charge you high fees on everything they can. Naturally, these fees lower the rewards value of your card since they eat off the big portion of your much-needed rewards. An annual fee of a travel card can go up to $500 or more.
A foreign transaction fee can also be nasty. If you go abroad and pay with your card, you need to keep track of additional charges. Banks tend to charge a fee of around 3%, and that's a severe leakage of your funds. Try to avoid cards that have any fees at all. Just the rewards.
So, in order to see how the card really benefits you, you need to count the rewards value and then deduct all the fees. The sum you get is the net profit of that card. That is what you want to focus on when choosing a card. In the calculation below, you can see how fees affect your rewards value with the Discover it® Miles credit card (spoiler - they don't).
Rewards Rate: 1.5x Miles per dollar on all purchases
Reward Bonus Offer: UNLIMITED BONUS: Discover will match ALL the Miles you’ve earned at the end of your first year, automatically. For example, if you earn 35,000 Miles, you get 70,000 Miles. That’s $700 towards travel! The more you earn, the more you get.
Annual Fee: $0
Foreign Transactions Fee: None
Finally, let's get to the sweet part and compare the cards that you can use to finance your trips. Here we've assembled all the criteria that can anyway affect the profitability of the card. Pay attention to important parameters, such as bonuses and fees. The rewards value of each card is presented in the first row.
**All figures are hypothetical and may vary individually. No additional cost is based on the no annual fee offer. In this calculation we assume that a cardholder pays off balances monthly, so no interest is accrued.
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