Are you missing out on $16 billion in travel credit card rewards?
Free travel is probably one of the best perks of owning a rewards credit card. From airfare to hotel stays to rental cars, consumers can save thousands of dollars a year just by earning travel rewards on their regular spending.
Given this, you’d think consumers would be chomping at the bit to rack up every free mile and point they deserve, right? Wrong. According to a recent survey from CreditCards.org, only 1 in 5 consumers use a travel rewards credit card, which means they’re missing out on nearly $16 billion in travel rewards each year! That’s right — $16 billion. A year.
Let’s take a look at why so many consumers are missing out on these free perks and how you can max out your travel card rewards.
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Why consumers don’t use travel credit cards
CreditCards.org surveyed over 1,000 adults across the U.S. and found that nearly 4 in 5 didn’t own a single travel rewards credit card. The majority of those were aged 65+ (80%) and 55-64 (78%), with nearly 60% of people aged 25-34 that didn’t own a travel rewards credit card.
The survey also asked why they chose not to own a travel rewards card. Nearly 38% of people said they don’t travel enough to make them worth it and 29% said they already own enough credit cards. Almost 20% of respondents said they don’t believe in credit cards and only about 10% said they don’t understand how they work.
Understanding how travel rewards credit cards work is the key to maximizing the benefits and figuring out how you can start traveling for free. Once you start racking up your free travel rewards, you can start traveling more, which earns you more free rewards and the cycle continues!
How travel rewards credit cards work
Most travel credit cards give consumers a certain number of points for each dollar they charge to the card. Typically, it’s a 1:1 ratio, although many rewards cards offer additional miles for spending in certain categories, like gas or groceries, or at specific stores.
Racking up travel card rewards is a bit complex because the process involves converting dollars spent into points, but in general, the more you spend on your credit card, the more points you earn. The CreditCards.org study found that almost 78% of consumers charge less than $10,000 a year on their travel rewards cards, although this number could reflect the high number of respondents who didn’t own a travel rewards card at all.
Once you earn your travel rewards, you have to be careful not to lose them – there are some inadvertent ways they can accidentally be forfeited. For example, some companies may take away points if you pay your credit card bill late and some points expire after a certain period of time. You’ll also need to make sure you meet any spending minimums and always read the fine print of your credit card agreement, as well as any mail the company sends you in case the terms change.
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Top travel rewards card perks
Consumers generally prefer airline rewards cards to credit cards that only offer points for specific hotels. Some of these cards are branded, meaning they only work for a certain airline, although there are general travel rewards cards that also offer free travel perks. The CreditCards.org study found that the general travel rewards cards are the most popular and nearly 20% of people own multiple travel rewards cards.
Discounted flights and hotels are the favorite travel rewards for consumers, with cash back coming in second, and free checked bags and low-interest rates landing in third place, respectively. Many travel rewards cards also offer exclusive perks, like priority boarding, although this was the least popular reward in the study.
According to the study, most consumers redeem their rewards once a year, although 36% said they either redeem their points every few years or have never redeemed their rewards at all. Given this, it makes sense that nearly $16 billion in travel rewards is left on the table each year.
There is a little bit of strategy involved in maximizing your travel card rewards, so here are some tips to make sure you get every point you deserve.
How to maximize travel credit card rewards
Credit card rewards programs may be great for the consumer, but they are ultimately designed to make money for the credit card company in the form of interest rates, fees, and fine print. Here are some ways to make sure these rewards are working for you and not the other way around.
Consider a generic travel rewards card: The type of travel rewards card you sign up for will usually determine how flexible your rewards are. Branded cards usually offer points for a specific airline, hotel or other partner and generic travel rewards cards will offer points with fewer restrictions. For example, certain air mile cards offer points that can be redeemed with any airline or hotel but an airline-branded card will only allow you to redeem your points for travel on that airline.
Watch for sign-up bonuses: Whether you choose a branded or generic travel rewards card, most will offer new customer sign up bonuses throughout the year. Card holders usually need to spend a certain amount within the first few months of owning the card to earn the miles, so if you are planning a large purchase or shopping a lot during a certain time of the year, this is a great way to fulfill that requirement.
Don’t carry a credit card balance: If you’re paying high-interest rates or fees on your credit card balance, you’ll negate any free travel perks you’ve earned. In many cases, you’ll end up paying more than the cost of a vacation! Earn your points, pay your balance in full and your rewards will truly be free.
Pay attention to spending categories: Many travel rewards cards offer bonus miles for spending on certain categories, like gas, groceries or entertainment. Sometimes these categories can rotate, so pay attention and strategize your purchases. Also be mindful of spending limits in these categories. For example, if you can only earn 6% bonus points on up to $3,000 in gas spending, you can never get more than $180 a year back in that category.
Pay bills with your rewards card: If you aren’t comfortable using your card to pay for everything, you may be able to pay your mortgage, utility, rent or cable bills with your credit card. Once you make the payment with your card, just automatically transfer the money from your checking account back to your credit card. You can easily earn thousands of points each month just by paying for your regular living expenses with a credit card.
Related: How to earn air miles without traveling
Turn unused miles into cash or gift cards: If your rewards are about to expire or you don’t think you are going to travel anytime soon, you can sell your miles on a site like Points.com for cash or gift cards, or contact a mileage broker. If you can only turn your rewards in for gift cards, you can either choose cards for a store you would normally shop or you can sell your gift cards for cash at secondhand gift card site, like Cardpool. You may not get a dollar-per-mile deal, but you won’t miss out on any potential perks.