Ask anyone about tips for saving money on travel and they’ll tell you that travel credit cards are a must. It makes sense since you can usually get a generous welcome bonus and you’ll earn points on every purchase you make. But is it really that simple to earn and use your points?
The simple answer is yes.
Why Travel Credit Cards are The Best Way To Save on Travel
There’s no doubt that credit cards are the best way to save on travel, but it may not be a good strategy for everyone. Getting and maximizing your points requires some effort and not everyone will want to deal with that. Here’s what you need to know about travel credit cards if you’re looking to save money on your next vacation.
There may be a minimum income requirement
When you look at travel credit cards, the higher-tier credit cards come with a better welcome bonus and increased earn rates. In most cases, there are three tiers of cards which are based on your income:
- Entry-level card – $0-$12,000 individual income requirement
- Mid-tier card – $60,000 individual or $100,000 household income requirement
- Premium card – $80,000 individual or $150,000 household income requirement
If you want the best offer out there, you want to apply for the higher tier cards. Unfortunately, if you don’t meet the minimum income requirement, you would automatically be rejected for the card. Always look for a card that you qualify for and gives you the best bonus.
It’s worth noting that American Express credit cards don’t typically ask for your income when applying so you may qualify for the American Express Cobalt Card even if you’re on a modest income.
There may be a minimum spend requirement
Most of the best travel credit cards in Canada require you to spend a minimum amount within a set period of time. For example, spend $1,500 in the first 90 days of card membership.
Some cards only require you to make a single purchase to get the bonus. There are also instances where you get a set amount of points after your first purchase, and then additional points if you meet the minimum spend requirement.
The number of points you get as the bonus is usually worth the trouble, but only if you had planned on making purchases anyways. That said, since the welcome bonuses are often lucrative, many people will purchase gift cards just to meet the criteria to get the bonus.
Another smart thing to do is to time your credit card application right before a major expense comes up such as your auto insurance. This way, you’ll meet the minimum spend requirement after just a few purchases.
Offers change all the time
To keep things interesting, credit card providers are constantly changing their promotions. Sometimes they’re great, while other times, you should probably wait to see if there’s a better offer later.
For example, theAmerican Express Platinum Card used to have a welcome bonus worth 60,000 points if you used a referral link. However, due to COVID-19, they reduced that bonus to 25,000 points. In this case, you’re better off just waiting to see if something better comes along.
There’s also the WestJet RBC World Elite Mastercard. Typically the signup bonus is $250 WestJet dollars after your first purchase, but they’ve had offers as high as $350. Even if you signed up with the regular offer, you still get free checked bags and a companion voucher which is incredibly valuable. Take a look at the current offers and ask yourself if it’s worth it before applying.
The signup bonus can be very valuable
This is where things get interesting. The welcome bonus alone is usually worth signing up for a new credit card. Generally speaking, you want to look for a bonus that’s worth at least $250 in travel as that will offset any annual fee that you’ll have to pay. Some welcome bonuses will even rebate the annual fee for the first year, so it’s like getting $250 for free!
What many people don’t realize is that sometimes you can increase the value of your signup bonus depending on how you use your points.
Let’s say you’ve signed up for one of the best Aeroplan credit cards in Canada and it came with a welcome bonus of 25,000 Aeroplan points. Since every route you fly has a different cost, you’re better off using your points when the cash fare is more expensive.
For example, let’s say flying from Toronto to Calgary or Vancouver will cost you 25,000 miles, but the Vancouver flight is $100 more if you’re paying cash. Using your points to fly to Vancouver would be a better value.
The extra benefits of travel credit cards are also valuable
Although many people focus on the signup bonus that comes with travel credit cards, the additional benefits need to be carefully considered too. Lounge access has become incredibly popular over the years and the Scotiabank Passport Visa Infinite Card gives you 6 free annual passes.
Those passes alone are worth more than $375. That’s a pretty good deal considering the annual fee of the card is $139 and I’m not even factoring in the welcome bonus or any other benefits.
Another popular benefit that comes with travel credit cards is travel insurance. Since the cost of medical attention can be expensive when you’re abroad, you want to ensure you’re insured. Having trip cancellation and lost luggage can also be incredibly handy if you find yourself in a situation where you need to make a claim.
You’ll earn points on every purchase
The really great thing about travel credit cards is that you’ll earn points on every purchase. But that doesn’t mean you should spend like crazy. Only charge things to your credit card that you were going to buy anyways.
You also need to make sure you pay off the full balance every month. No amount of rewards are worth it if you have to pay interest.
If you want to maximize the value of your travel points, you really need to know how each loyalty program works.
You also need to factor any blackout dates, seat restrictions, and taxes when claiming your points. Some people may not want to deal with this, so getting one of the best cash back credit cards in Canada might be a better idea.
Take any cash back you earn and put it in your vacation savings account. When you’re ready to book a trip, you’ll already have some money set aside.
Travel credit cards are an incredible way to save money on travel
And if you really want to accumulate points fast, consider applying for multiple cards. That said, every time you apply for a new card, your credit score drops 10 points, so be smart about how you use your travel credit cards!
This post was written by Barry Choi of Money We Have.
