Travel credit cards aren’t a new thing – they’ve been around nearly as long as credit cards have been. Times have changed, and instead of being chained to a particular airline like you would have been a couple of years before, travel reward credit cards are more flexible. The problem is that you might end up paying for this flexibility.
One thing that a lot of credit card companies who give travel rewards do to make up for these rewards that they have to give out is to have higher interest rates. If you don’t carry a balance, this doesn’t matter to you, but if you do carry a balance, you end up paying for your rewards. Times are tough, so if a travel rewards CC has a higher interest rate than what you are currently paying, changing cards is probably going to be a mistake, even if you don’t usually carry a balance, because you never know what the future holds.
Another way where a frequent flier credit card might end up costing you is in extra fees when you travel. If you get a $10 off coupon for a certain hotel, only to find that you can’t use it or that you it will cost you more to use it, it isn’t going to be a very good reward.
The third problem with some of the travel reward credit cards out there is that they get you excited about all of the special bonuses, but after the introductory period, the bonuses abruptly fade away and you are left with a credit card that doesn’t really give you anything but a measly 1% back. Once you start using a credit card, it’s difficult to change, so most people just keep the credit card they don’t like instead of getting a new one. Plus, if you change credit cards too often, your credit score will go down, which could affect your chances of getting a mortgage or a car loan. When applying for a credit card, do so wisely.
Of course, people who get offers for a credit card that gives great rewards often go a bit crazy with their buying. Just because you get one percent of your purchase price back in the form of a travel reward, doesn’t mean that you should charge things that you wouldn’t normally be able to buy. It isn’t free money, but rather an incentive for customers to use the card. If you become obsessed with charging, you are going to probably find that the card ends up costing you a lot of money.
If used correctly, a travel reward credit card is going to work just like every other credit card. It is usually those people who have good financial knowledge (and a lot of self control) who are able to get the best rewards and not end up paying a lot of interest on purchases that they don’t really need in order to get a 1% gift certificate for their next weekend away. If you have the financial knowledge that you need, you won’t have to worry about your credit card, other than where you will go on your next vacation.