NerdWallet's Smart Money Podcast - From the archive: "What's the best way to rack up travel rewards quickly?"

Episode Date: January 20, 2020

We'll be back in a couple weeks. In the meantime, here's how you can use these winter months to rack up the credit card points to fund your summer travel. And be sure to send us your money questions! Call or text the Nerd Hotline at 901-730-6373, or email [e-mail].

Hey nerds, Sean here. We are currently hard at work answering your money questions and putting together a fresh batch of episodes for you. In the meantime, here is an episode from our archives with the best tips on how to make the most of a travel credit card. I know that January might seem like an odd time to think about going on a vacation after the holidays and all that, but we found that these cold winter months are actually the best time to start building rewards if you want to fund summer travel on credit card points. We'll be back in a few weeks with new episodes for you. And in the meantime, please send us your money questions. You can email them to podcast at nerdwall.com or you can text or call the nerd hotline at 901-730-6373. That's 901-730-NERD.

Talk to you soon. Hello, and welcome to NerdWallet's Smart Money Podcast, where our team of writers answers your real-world money questions, so you can get smart and get back to doing you. We're here at NerdWallet HQ. My name is Dayana Yochum. I'm joined by my co-host Shawn Piles. Today we're discussing a topic that is near and dear to my heart. Travel. Happy hour. Specifically summer travel. And how you can get the most out of that travel credit card burning a hole in your pocket. Without further ado, Dayana, will you please read the question? I would be happy to. Today's question comes from Kevin M. And Kevin asks, how can I squeeze the most value out of a travel credit card

for a summer vacation I have coming up? Excellent question, Kevin. I actually did the same thing last summer. I met up with some college friends in Nashville, and we did a road trip out to Dollywood with a Mustang and convertible down. It was beautiful. And as if that wasn't fabulous enough,

we funded the whole thing on my travel credit card points. Which is awesome, and I'm still waiting for my souvenir Dollywood snow globe, by the way. I think it must have gotten lost in the mail. With the butterfly magnet. So sorry. The keychain, the mug. Anyhow, looking forward to getting those. Today, however, we have called our own national treasure, credit card superstar, Sarah Rathnarf.

Sarah has traveled all around the world on her travel credit card points, having racked up over 600,000. She's visited Maui, Australia, New Zealand, Japan, I'm sure some other countries that I'm not even remembering right now. And she's going to help us figure out how you can go anywhere you want this summer on your travel credit card points. Hi, Sarah. Thank you for joining us. Thanks for having me, happy to be here. So Sarah, on behalf of Kevin, hit us with some tips on using points for him to fund his summer vacation. Well first, if you haven't signed up for a travel credit card yet, or if there's one you've had your eye on, you might want to consider getting a new credit card for its signup bonus. NerdWallet's 2019

travel credit card study found that a typical signup bonus has a value of about $550. Right, taking advantage of a signup bonus can really knock a big chunk out of your travel expenses. Well so how far in advance does Kevin need to apply for a card if he wants to use the points or miles or other perks on an upcoming trip? Well, consider applying at least five months before you leave on your next trip. Okay, that's a good tip. That'll give you enough time to build up rewards points or cash back through your everyday spending. And you'll also earn and be credited for the signup bonus. And you should keep in mind

that it often takes a billing cycle or two to receive that signup bonus after you've met the spending requirements for it. Right. All right. So Sarah, what if Kevin doesn't have five months? Maybe he has two months or one month. What can you do in that case? Well, Kevin's not out of options. You can always take the credit card that you earn travel rewards on with you on your trip and earn points through your spending on that trip and use those points to pay for a vacation in the future. And your card may even help you save money on travel expenses while you're on vacation too. One thing you can use your card for, some cards will often offer discounts on travel experiences like museum tickets or other special events. And those costs can really add up day to day on a vacation. Also, another thing to think about is that travel cards often include some sort of travel insurance coverage or travel protection

in case your baggage gets lost or delayed or your flight gets canceled or delayed by a substantial number of hours, which can happen anytime to anyone, right? And sometimes you have to cancel your trip or cut it short due to emergency situations. And if your card provides enough coverage to reimburse you for what you spent on your trip, then you might be able to get away with skipping travel insurance because that can cost up to 10% of the total cost of your trip. That's not insignificant. Right.

If you're traveling abroad, that could be over $100. Yeah. Yeah. Absolutely. Right. And so another thing to think about is some travel cards have partnerships with certain hotels and airlines, so you can get more points for each dollar spent at these places. Which leads me to a question that a lot of people have.

What if you're trying to decide between a general rewards card versus a co-branded one that's tied to a specific airline? What should people think about? Yeah, that can be a tough decision. So something to remember is that airline and hotel branded cards are less flexible than more general travel cards. With those branded cards, you tend to earn the most, like I said, when you spend money with that airline or that hotel, and you also get the most value out of your rewards points when you redeem them to use on those brands. Compare that to general travel cards. They offer the same earning rate and redemption for all travel costs. So the upside to a branded

card, though, is you get certain perks that you wouldn't get with a general travel card. So an airline card might get you free checked bags, which can save you something like $60 on a round trip flight. You may get priority boarding. You also may get other perks. Sometimes you get closer to getting status with the airline. So that could lead to free upgrades and things like that too. Credit cards that are tied to loyalty programs with hotel brands can earn you things like free hotel stays, free breakfast, late checkout. So if you're loyal to a specific airline or hotel brand, those cards could be worth it for you if those extra perks really speak to you. But if you're not loyal and you'll just kind of travel on whatever airline has the best rates, you'll stay at whatever hotel has the

best rates and location, then consider a general travel card so you can earn points that you can cash in on any travel costs and not just those with specific brands. So basically, we're talking a branded card, be brand aware when you're using it. General travel card, look at how good it is for general purchases and other perks. Yeah. So to squeeze the most out of your travel credit card, it really comes down to using it in all the right places. Our 2019 travel study found that Americans are going to spend about $1,500 on their vacations this summer, and so if you think you'll be swiping a lot, think about where you can get the most points for your dollar, whether it's a hotel or a restaurant or a flight. But we should chime in here with the with the public service announcement. Yes. That

you don't want to charge that much or anything that you can't pay on a rewards credit card. Sean, take it away. Yes. As NerdWallet's primary debt writer, I have an obligation to tell you to be very careful with these cards. Because they tend to carry higher interest rates, you want to make sure you're paying off your balance as much as you can, ideally entirely each month. Right. We want you to be putting your money towards fun things like renting convertibles and going to Dollywood and not getting souvenirs for your friends,

not putting it towards things like paying interest on debt. Not very fun. Right. Yeah. That's an excellent point because that's another thing I really wanted to add on to this. If you currently have credit card debt, pay that debt off first before you apply for a travel card, because the interest that you're paying on your current debt is going to wipe out the value of any points you would earn. That's a great point, Sarah. Thank you very much. And I think that about covers it for us today. I hope you were taking notes, Kevin. Again, Sarah, thank you very much for joining us and sharing all of your insights. It was my pleasure. And Kevin, I hope you have a great vacation.

Thanks, Sarah. All right. Now let's get to our top three takeaway tips. All right. Let's do this. To start, if you need to rack up some points fast, it's all about the sign-up bonuses. Shop around and see which cards offer the best upfront points.

We have a link to our credit card comparison tool on our show notes page at nerdwallet.com slash podcast. Next, remember it may take a few billing cycles for you to be credited with that sign-up bonus, so be sure to work that into your planning if your vacation is coming up. And also, make sure that doing what it takes to earn that bonus doesn't put you into financial jeopardy, that you're not overspending just to earn points.

And if you don't have time to get enough points before your travel, be smart about how you use your credit card while on vacation. Shopping in all the right places with the right card can get you a lot of points. And that's all we have for this episode of NerdWallet's Smart Money Podcast. Aw, really? Sadly, yes. Okay. But if you have a money question of your own, turn to the nerds.

You can call us at 901-730-6373. That's 901-730-NERD. Or you can email us at podcast at nerdwallet.com. Exactly. And visit nerdwallet.com slash podcast for more on this episode. And now a brief disclaimer, courtesy of NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors.

This nerdy info is provided for general educational and entertainment purposes. And with that said, until next time, keep it nerdy.