Choosing a credit card used to be about just getting the best interest rate and the highest credit limit. Today, though, credit cards offer many different benefits. One of the most popular is travel rewards.
For each dollar spent on purchases, a travel rewards credit card will give 'miles' or points that can be collected and used to pay for air travel and hotels. Travel rewards credit cards are particularly useful for executives who travel regularly on business, and are able to build large balances of 'miles'.
Some of these cards are affiliated to particular hotels or airlines. In this case you will get extra points for credit card purchases from that hotel or airline, but you may be limited to that supplier when you come to spend your points.
Many cards offer increased points for purchases over a certain monthly amount, for particular types of purchase, or for spending with particular partners. There may also be caps on the amount of points you can earn, or expiry of unused points after a certain time. The points formula is one important factor in your choice of card.
There may also be restrictions on the way that points can be spent. For instance, you may have to book airline travel 14 or 21 days in advance, and the trip may have to include a Saturday night stay. Some points programs state that the tickets must be non-refundable; others insist that you book through the official program agent, so you can't shop round for the best deals.
Some cards enable you to transfer points to an Air Miles program. This allows you to consolidate your Air Miles and travel rewards credit cards points, so that a bigger reward can be 'bought'.
Most travel rewards credit cards charge an annual fee, which can be as high as USD 120. If you are considering applying for a travel rewards credit card, you need to work out whether your purchases are high enough to offset that annual fee fully. Unless you are spending over USD 1,000 a month on that card, it probably would not be a good investment.