Tip of the week: exercise caution with travel reward cards

Credit cards that offer travel rewards can be great. By making purchases you would otherwise make, or by spending frivolously and needlessly, you can earn free flights and other travel perks. Of course, very few things in life are actually free. For the average person, these rewards are earned because you bought them.

I used to have a Delta American Express card. It was a great deal to sign up. 25,000 frequent flier miles (the value that a free domestic roundtrip ticket starts at) and the first year with no annual fee were offered. Currently, Delta is giving 30,000 miles to sign up and also waving the $95 annual fee for the first year. If you fly Delta or another airline that gives an equivalent deal, it’s worth signing up for. And it could be worth keeping past the first year if you pay off at least most of your monthly charges and don’t carry much of a balance. It depends what perks you’re actually accumulating, compared to what the annual fee is.

You could earn a ticket to party on New Orleans' famed Bourbon Street. travel reward cards
You could earn a “free” ticket to party on New Orleans’ famed Bourbon Street. But what will this cost you in the long haul?

After a couple years with a Delta American Express card and paying a 13.5% interest rate (I was recently told by a Delta representative that the rates currently start at 15.5%) I called and asked if they could lower my interest rate. I was told that they could not with the Delta reward card, but if I transferred over to an American Express Blue card, with far fewer “rewards”, my interest rate would lower to 8.5%. Seeing as how I generally carry a balance, a 5% reduction on my interest rate made tossing my Delta AMEX out the window worthwhile.

That being said, I still carry a travel reward card- a US Bank Flexperks Visa. They don’t give a lower interest rate than 14% but the annual fee is just $49 and you can use 5,000 points to pay the annual fee the 2nd year. The first year the annual fee is waved but you need to spend $2,500 in the first 5 months to receive the introductory 17,500 points. It would vary on the individual, but I would generally recommend the US Bank Flexperks over the Delta AMEX because points earned with US Bank can be used on any airline. I recently cashed in 20,000 points for a free $400 plane ticket on Delta from Orlando to San Diego. It was close to Thanksgiving so the tickets were pricier and a good time to cash this in. And the kicker- I earned Delta skymiles on top of my ticket being completely “free.”

The Flexperks card has been voted the best travel reward card in the past so it might be worth trying for at least 2 years to see how you go. Afterwards, you may want to consider transferring your balance to a card with a lower interest rate and canceling your Flexperks card.

Of course, US Bank is constantly trying to lure me to spend more money and go further in debt. They frequently send checks that can be used for a lower interest rate on purchases for the first year or bonus points for spending a bunch of money in a short period of time. Brewster’s Millions!

Don’t fall into the enticing trap. If you rack up a lot of debt it can be difficult to pay off and you are then very much so paying for that “free” plane ticket. So it might be best to toss the reward card and just “pay” for the best travel bargains you can find.

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