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Traveling regularly can have a significant positive impact on your health and productivity, but it's not always affordable. Fortunately, you can save money by earning an intro bonus with a credit card. Here's what you should know about credit card bonuses and how they can work to save you hundreds of dollars on your next trip.
Credit Card Rewards Can Help Offset a Vacation
The most straightforward way your credit cards can help you offset or fully pay for an upcoming trip's expenses is with their rewards. Depending on the cards you have and the type of rewards they earn, you may be able to use your rewards to cover the cost of your airfare, hotels, rental car, gas, food and more.
Here are some potential ways you can do this.
Book via Your Card Issuer's Travel Portal
Many major financial institutions, including Chase and Capital One, have their own travel platform. So if you have a card that earns Chase Ultimate Rewards points, for instance, you can use your rewards to book travel through the Ultimate Rewards portal and save money that way.
This option is convenient, and in some cases, it's a method you can use to squeeze more value out of your rewards.
That said, some of these portals may not offer access to all travel providers, so you may miss out on a deal with a certain airline, hotel chain or other brand.
Book Directly With Travel Providers
Certain travel credit cards, including the Capital One Venture Rewards Credit Card, allow you to use your card to book travel with any eligible travel provider, then use your rewards to get a statement credit that helps cover that purchase.
This method offers a lot of flexibility and also allows you to book directly with airlines, hotel brands and car rental companies, so you don't have to go through a middleman if there are issues with the reservation.
Some travel rewards programs allow you to transfer your points or miles to select partners, usually airline and hotel loyalty programs. You can do this with Capital One Miles, Chase Ultimate Rewards and certain Citi ThankYou® Points.
Because airline and hotel rewards programs often have dynamic pricing structures, this approach can make it possible to get more value out of your rewards than if you were to redeem them directly with the card company. That said, it can take more time and research to maximize your rewards this way.
Redeem for Cash or Gift Cards
Some credit cards allow you to redeem your rewards for cash or gift cards at a good redemption rate. This can make it possible to cover expenses that travel rewards don't traditionally cover, such as groceries, restaurant meals, gas and more.
However, it's important to note that many travel rewards programs don't offer as much value if you redeem your rewards for cash versus travel. With Capital One, for instance, your rewards miles are worth 1 cent apiece on travel redemptions but just 0.5 cents apiece if you redeem them for cash.
Intro Bonuses Are Another Way to Save
In addition to the ongoing rewards cards earn on purchases, many of the top travel rewards cards offer a one-time intro bonus for new cardholders. In most cases, you'll be required to use the card to spend a certain amount on purchases within a set period in order to earn the bonus.
The spending requirement will vary depending on the card, but it usually ranges from $1,000 to $5,000, and most cards give you three months to meet the requirement—though in some cases, you may get up to six months.
In rare cases, you may get the welcome offer after you make just one purchase. But in most cases, expect to have to meet a spending threshold.
One thing to keep in mind is that many card issuers place restrictions on who can earn a bonus. For example, if you've earned a bonus on the same card recently—say you had the card a few years ago and canceled it but want it again—you may not qualify to receive the intro bonus. This is one way card issuers can prevent credit card churning.
What to Consider Before Earning a Welcome Bonus
If you're thinking about applying for a new credit card to take advantage of a welcome offer, there are several factors to keep in mind before you pull the trigger and apply.
- Spending requirement: Earning hundreds of dollars worth of points and miles can be exciting, but it's important to avoid overspending to achieve that goal. Check the card's spending requirement and determine if you can achieve it with your normal spending habits. For example, if you need to spend $4,000 in three months to earn a bonus, that comes out to roughly $1,333 per month. It's best to avoid an offer like this if you can't pay off the bill in full every month—otherwise you risk losing the rewards' value by paying interest on charges.
- Ongoing annual fee: A welcome bonus is often enough to make up for the card's annual fee for the first year and often even longer. But once you redeem those rewards, you'll need to pay the card's annual fee out of pocket. Run the numbers to find out whether you can get enough value out of the card after the intro bonus through its rewards program and perks.
- Rewards value: Not all rewards programs are created equal. While some credit cards may offer higher bonuses, they may not necessarily be more valuable than bonuses with fewer points. Do your research on point valuations and compare average values to determine which card can give you the most value. Look for cards that offer rewards rates that align well with your spending and also benefits that can enhance your travel experience.
- Other card features: While potential reward earnings and the card's welcome bonus are likely what you prioritize, there are other cost-saving features to keep in mind as well. With a travel credit card, you can benefit from things like extended warranties, purchase protection, added insurance coverage and more. Read the card's fine print before you sign up so you can understand the complete suite of benefits it offers.
Check Your Credit Before Applying for a Credit Card
Most of the best travel rewards credit cards with high intro bonuses require good to excellent credit. That generally means a FICO® Score☉ of 670 or higher, but each card issuer has its own criteria for creditworthiness.
As a result, the higher your credit score is, the better your chances of approval. Check your credit score and report to determine where you stand. If your score needs some work, take some time to review your credit report and look for areas where you can improve. It may take a while to achieve the credit score you want, but the effort can open up opportunities for bigger and better credit card bonuses and benefits.