Are travel point / reward credit cards worth the hassle and cost? Many such cards have fees, and when you try to book there are often restrictions. What has your experience been with these types of cards? How best to use them effectively, if at all?
A lot of whether or not using those types of cards is worth it depends on how you use your credit card. If you use your credit card very often and pay it off in full each month, then often these cards can be great for you. If you often leave a balance on the card then a card with a lower interest rate would be better to focus on. I personally would not use any points card that had any actual fees with it. They already typically have a below average interest rate as it is.
For us, we very rarely use our credit card. For utilities we use e-checks and for most other things we use a cash budgeting system. As a result, for us the lower interest credit cards are more important since we rarely would gain any worthwhile amounts of points for use.
Rewards credit cards are without a doubt worth it.
First, the caveats:
- You need to be responsible - paying interest or late fees will wipe out any of your savings.
- You need to be psychologically strong. It can be tempting to allow your newfound "points" to create an incentive to spend more.
Second, the positives:
- Little to no effort required. Apply for the right card, use it whenever you can. Pay off your bill at the end of the month.
- Significant payoff over time. I don't spend a ton of money, and in the past couple of years, credit card rewards have given me hundreds of dollars in cash rebates, as well as hundreds of dollars in gift cards.
Third, recommended cards:
- Fidelity Rewards 2% American Express. Gives you 2% cash back on all purchases. No annual fee. Deposits into a Fidelity brokerage, retirement, or 529 account once rewards hit $50.
- American Express Starwood Preferred Gold card. Gives you 1 SPG point on all purchases, bonuses on spending at Starwood hotels. This is the best travel card available. The annual fee ($65) is lower than most airline cards, and SPG points are far more flexible, as they can be used for hotel rooms or transferred to many airlines.
- Citi Forward Card. Gives you 5 "ThankYou Points" at restaurants, movie theaters, and bookstores (including Amazon.com). 1 point on all other purchases. No annual fee. ThankYou Points can be redeemed for cash at a value of 0.75 cents/point, or for gift cards at 1 cent per point. Great if you (like me) make most of your spending at restaurants, bars, and/or Amazon.