With so many great travel credit cards on the market, it may be tempting to just apply for the one your friend has and call it a day. But that card might not be the right card for you based on your credit score, how you prefer to earn and use rewards, and how willing you are to accept credit card fees. To ensure you get the best option for your needs, follow these five steps when applying for your next travel card.
[See: 6 Ways to Treat Yourself on a Budget.]
1. Check Your Credit Score
Whether you can get approved for any particular credit card depends heavily on your credit score. Most travel cards are reserved for consumers with good (690-719) or excellent (720 or higher) credit scores. If your score is below 690, you’ll want to spend some time building it before you apply for a travel rewards card.
Many lenders and credit card issuers offer customers free access to their credit score, so check whether you can see your score through an existing account. Alternatively, you can purchase your credit score at the websites of the three major credit bureaus — Equifax, Experian and TransUnion. Once you know your credit score, you can check the details of different travel cards to see whether you’re likely to qualify.
However you get your score, make sure it’s a FICO score. FICO scores are the most widely used by lenders, so they’ll be the most accurate in determining whether you’ll get approved for the card you want.
[See: 12 Simple Ways to Raise Your Credit Score.]
2. Decide Which Type of Travel Card You Want
There are two basic types of travel credit cards — general travel cards and cobranded cards:
— General travel cards earn rewards on every purchase, and you can redeem rewards for almost any travel expense, regardless of which airline you fly or which hotel you stay at for any given trip.
— Cobranded cards carry the name of a specific airline or hotel chain. As a general rule, they give you higher rewards on purchases from the cobrand partner (such as American Airlines or Hilton Hotels) and lower rewards on other purchases. Rewards can be redeemed for free flights or hotel stays. These cards often offer valuable perks, from free checked bags and priority boarding to free upgrades on hotel rooms.
Consider your spending and travel habits. If you value flexibility and don’t consistently fly with one airline or stay at one hotel chain, you’re better off with general travel. If you’re a loyalist and a frequent flier or frequent guest, consider a cobranded card.
3. Understand the Value of the Rewards
Many consumers look only at the number of points or miles they’ll earn with a certain card, without considering that the value of those rewards is equally important. And no wonder: Redemption values aren’t typically advertised in a card’s promotional materials.
An analysis of the top rewards programs reveals that the average value of a point or mile can differ substantially from one program to the next. Different programs also offer different redemption options, and the best ways to redeem rewards vary by program. So before you get too excited about a seemingly high rewards structure or forgo a card because the sign-up bonus doesn’t look impressive, learn about the redemption rate and choose a card that will net you high-value rewards.
4. Calculate Whether You Spend Enough to Justify an Annual Fee
No one likes fees, but sometimes it makes sense to pay an annual fee to get great credit card rewards. Cards with superior rewards programs and perks tend to charge a fee, and you can still come out ahead if your spending habits and preferred perks match up with what a card offers.
Let’s say you’re evaluating two travel cards — one with a 2 percent rewards rate and a $75 annual fee, and one with a 1.5 percent rewards rate and no annual fee. In this case, if you put more than $15,000 a year on the card, you’d get more out of the card with the fee. If you spend less, the no-fee card is the better option. Keep in mind that this calculation doesn’t take into consideration sign-up bonuses, and cards with annual fees will almost always have significantly larger sign-up bonuses than will no-annual-fee cards.
[See: 12 Ways to Be a More Mindful Spender.]
5. Know the Best Time to Apply
Once you’ve determined which card you’d like to apply for, consider waiting for a better sign-up bonus. According to a recent NerdWallet study, general travel cards and cobranded airline cards are most likely to have higher sign-up bonuses in November, while cobranded hotel cards’ sign-up bonuses typically peak in August. By waiting until your preferred card offers a better bonus, you could enjoy thousands of extra miles, equaling a few hundred dollars more in travel rewards for your good timing.
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How to Choose the Best Travel Credit Card originally appeared on usnews.com
