I thought long and hard about getting the new US Bank Altitude Reserve card. The card definitely looks like a potential big winner. People (not me) who can maximize the 3X mobile payments bonus might really have something on their hands. Ultimately, I decided to pass on the card for now. One of the main reasons for this is my belief that I’ve begun to overrate credit cards travel credits. I’ll present my reasons why and I’m also curious to hear what others think in the comments below.
This post serves as a bit of a corollary to my post on all the credit card annual fees I theoretically need to pay. Readers, you’ll be happy to know I’ve canceled/downgraded 3 cards since then with 2 more planned for this month.
You still pay a huge annual fee
I’ve long believed that getting, for example, a $300 travel credit on the Chase Sapphire Reserve means I’m essentially paying a $150 annual fee. This kind of language often gets used when people try to sell you credit cards. As my thinking about the game evolves, I’m not sure I quite believe that anymore.
Bottom line, you still pay $450 a year. Yes, you potentially get $300 of that back, but you still need to drop the cash up front. But if your finances are tight, you still need to front a significant amount of money. While that may not be my particular circumstance, the high annual fee that I actually need to pay in cash flows into all the reasons I am starting to find travel credits overrated. For my particular circumstance, of course.
When you have multiple travel credits, they become harder to redeem
While we just took a big trip to Hong Kong, for one reason or another we plan to travel less than usual for the remainder of 2017. (Related: two 15 hour flights with two little kids). We booked our Hong Kong flights on points and stayed in a relative’s apartment. That means the only travel credits useful to us on this trip came from Chase Sapphire Reserve. Admittedly, we have two of these, so that’s $600 in reimbursements, but we didn’t use all that up for our taxis and trains. (Hmm, should have tried to buy my Hong Kong Disney tix to test…woops).
Meanwhile, my three $200 AMEX Platinum airline credits and one $250 Citi Prestige airline credit lay dormant and useless. Now, if you state that you have $1450 in travel credits, that sounds great! But in reality, especially for a family that is cutting back on travel for a bit, that’s not particularly useful.
But you can buy airline gift cards with your travel credit! (But then you need to keep track of them)
So admittedly, my $600 in AMEX airline credits actually are no longer available to me. That’s because like any good travel hacker I redeemed them for airline gift cards way back in January. Now, again, I used to use this to justify the annual fee – I’m only paying annual fee minus travel credits total!
Well, you only get value from the travel credits if you actually use them. And between canceled Jetblue flights, United compensation, Delta compensation, and AA and DL travel credits from AMEX, I’m sitting on like $800-$1000 of travel credits. Credits that I likely will only use on domestic flights, which I’m taking very few of this year.
So, suddenly I need to keep track of all these credits that will not be used for awhile. It’s easy to make a mistake and just lose that “money”, which actually was never really money to begin with. So one thing I’d recommend is for you to ask yourself whether travel credits fit in with your travel goals. If not, you might find yourself losing flexibility or buying flights just to buy them and less because they fit in with your goals.
Travel credits and points can become mutually exclusive
If you’re traveling 10+ times a year this probably won’t be an issue for you. But I keep running into this problem where I can either use travel credits to pay for travel or use points. So I naturally opt for using my travel credits first, but then why did I earn all these points?
Basically, this comes back down to “resources you aren’t using are wasted.” You can hoard travel credits just like you hoard points and there are only so many rainy days. So make sure travel credits aren’t getting in the way of redemptions that you want to make. Which brings me to my most important point.
When you use travel credits, you are paying cash for travel
I think Free-quent Flyer said this somewhere awhile back, but it never clicked with me. Travel credits = paying cash for your travel. You paid cash for your annual fee, and some of that cash went to pay for your travel. If I use $200 in AA gift cards that I got from AMEX Platinum, I paid $200 for those flights!
But what’s even worse is this. When I said above that I need to decide between using travel credits or points, what I’m actually deciding between is using money I already spent or points. Which is why using the travel credits is a no brainer.
But if your whole goal is to save the amount of cash you pay on travel, travel credits run counter to that. They force you to pay cash for your travel! And remember, you can’t invest points in your kids’ college education or your retirement, only cash. So if you pay cash for your travel in the form of travel credits, that’s less money into those accounts. Makes me think.
Final Thoughts
So yes, in the end, I think travel credits are a bit overrated. Don’t get me wrong, they are great, but from this point forward I’m not going to let them be a selling point in getting a credit card. A credit card must bring good value to me regardless of the travel credit, because the travel credit forces me to pay cash for my travel. Obviously this year is a bit of extreme for our family due to lighter travel loads (I hope to ramp up again in 2018), but I think I’ve learned a valuable lesson from it.
What do you think, are travel credits overrated or an important part of deciding whether to get a card? Let me know!
Featured image courtesy of Pixabay
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