Credit Cards

Don’t Depend on a Sign-up Bonus for Your Last-Minute Getaway

More Americans are searching for travel credit cards after the holidays. Find out how quickly a a new travel card and its bonus can pay for your travel plans.

It’s a popular time for travel credit cards. Whether the cold weather has inspired thoughts of balmier destinations or a new year has kicked off vacation-planning, interest in travel rewards credit cards has jumped since the holidays ended.

Google searches for “travel credit cards” skyrocketed 50% in the two weeks following Christmas, a spike that has consistently happened in the last five years in late December through mid-January. After that, interest falls off until the summer when it bounces back again.

There are many reasons why this jump occurs then. Vacation days reset at work, so some may start planning spring or summer travel. Others, recovering from expensive holiday travel, may be looking for a more economical way to see family the next time around. Or, the recent arctic blast may have some Americans looking for a quick getaway to warmer climes.

No matter the reason, there are three factors to consider before signing up for a new travel card.

Whether, and When, You’ll Get the Sign-up Bonus

Many travel credit cards come with a sign-up bonus that requires charging a minimum amount in the first few months of the card’s opening. The more you must spend generally means a higher bonus. The most lucrative bonuses among travel cards can be worth up to $700 and $800 in free flights or hotel stays. But before filling out an application, make sure you can qualify, warns Robert Harrow, ValuePenguin’s credit card analyst. “Most cards only allow you to get a bonus once every two years,” he says. “That means if you had the card in the last 24 months, then cancelled it, you probably won’t get that big point boost again.” American Express is more restrictive: You can only earn one bonus per card per lifetime.

If you’re looking to book travel immediately using the bonus, factor in the time it will take to earn the bonus first and then have it post to your account. Banks usually say that bonus points will be credited within six to eight weeks from reaching the minimum spend amount, but in many cases, it can be as little as four weeks. Still, that may be too long if you’re looking for a last-minute jaunt.

The Annual Fee, Now and Ongoing

Many travel credit cards charge an annual fee, so you should do the math to figure out if paying that fee makes financial sense. In many cases, the sign-up bonus more than offsets an annual fee in that first year, while other cards may waive the fee the first year for new customers. After that, it depends on your spending and other perks the card provides.“You should never just dismiss the [fee] out of hand,” Harrow says. “It all comes down to net returns.”

For instance, if you spend less than $12,000 a year, you likely won’t recoup the annual fee. But if you spend more, the rewards you earn may offset the fee. But a travel card with a $450 annual fee may also come with a lucrative travel credit that reduces the fee substantially each year—as long as you make enough travel purchases to use the credit. Harrow recommends using an online credit card comparison tool to determine if you should pay an annual fee.

You can also cancel your card in the second year to avoid paying the annual fee if it was waived that first year. Doing so could hurt your credit score by increasing your utilization rate, or the percentage of your available credit that you use. Alternatively, your issuer may offer a lower fee to keep you as a customer, making the card worthwhile. Or, you can ask to downgrade to less expensive travel credit card.

How Much You Spend on Travel, and With Which Companies

There are two types of travel rewards credit cards and one may be better suited for your travel needs.

Co-branded cards are linked to a specific airline or hotel brand and you earn loyalty points to redeem with that brand. You also get other card perks such as early boarding on flights, free companion tickets, late checkout or free checked luggage. These are best if you’re an avid traveler and consistently book with the same airline or hotel.

With generic travel cards, you can redeem your points for cash back, flights, hotel stays or statement credits, but you get the best value for travel-related purchases. You can transfer points to hotel and airline loyalty programs through certain rewards programs like American Express Membership Rewards and Chase Ultimate Rewards. Generic travel cards maximize your rewards value and give you the most flexibility when redeeming. They are also the best option if you spend a lot on entertainment, travel and restaurants.

Janna Herron

Janna is a former Senior Writer at ValuePenguin covering banking, credit cards and credit scores. She has spent more than a decade writing and reporting on personal finance, real estate and business, and has received three journalism awards for her work.

These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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How We Calculate Rewards: ValuePenguin calculates the value of rewards by estimating the dollar value of any points, miles or bonuses earned using the card less any associated annual fees. These estimates here are ValuePenguin's alone, not those of the card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer.

Example of how we calculate the rewards rates: When redeemed for travel through Ultimate Rewards, Chase Sapphire Preferred points are worth $0.0125 each. The card awards 2 points on travel and dining and 1 point on everything else. Therefore, we say the card has a 2.5% rewards rate on dining and travel (2 x $0.0125) and a 1.25% rewards rate on everything else (1 x $0.0125).