Sign-Up Bonuses Draw Consumers to Travel Credit Cards, but Nearly a Third Say They Overspent to Earn Rewards
Sign-Up Bonuses Draw Consumers to Travel Credit Cards, but Nearly a Third Say They Overspent to Earn Rewards
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As more Americans hit the roads and fly the skies this year for vacation and other travel, they’re increasingly looking to travel credit cards to help offset the cost. In fact, nearly half of Americans — including nearly two-thirds of younger consumers — say they plan to apply for such a card in the next six months, according to a ValuePenguin survey of 1,008 consumers.
It’s often the lure of the sign-up bonus, but many admit to blowing their budgets to meet minimum spending requirements. Find out more about how consumers use travel rewards credit cards and get tips on choosing the right one for your needs.
- Key findings
- Nearly half of Americans considering opening new travel credit card
- Nearly a third of travel credit cardholders overspent to get sign-up bonus
- Travel rewards can help combat rising vacation costs, and many cardholders are looking for ways to earn even more
- 5 things to consider when applying for a travel rewards credit card
- With vacation costs on the rise, Americans are eying travel rewards cards. Almost half (49%) of Americans — and 64% of millennials and Gen Zers — are considering applying for a travel credit card in the next six months. Of that group, most (46%) will apply for a general-purpose travel rewards card, while 31% will consider a hotel-branded card and 28% an airline-branded card.
- Lucrative credit card sign-up bonuses attract travelers, but that sometimes leads to overspending. More than 4 in 10 (45%) travel credit cardholders opened their card specifically for the sign-up bonus, but nearly a third (32%) of those whose card came with a sign-up bonus say they spent more than they could afford to fulfill the spending requirements.
- More than half (54%) of travel credit cardholders also use that card for non-travel expenses, helping fund future vacations with rewards. Many cardholders (68%) have purchased additional rewards such as airline miles, which can often be bought at a discount.
- Consumers’ aversion to annual fees may mean they’re missing out on rewards — but Gen Zers are the exception. A good portion of Americans — 46% — aren’t willing to pay an annual fee for a travel rewards card, even if they’d get an equivalent dollar amount through perks and rewards. However, Gen Zers disagree, as only 16% aren’t willing to pay an annual fee, and 37% would shell out $300 or more.
- More Gen Zers have travel credit cards than any other generation, with 4 in 10 consumers ages 18 to 25 having at least one travel card in their wallet. Other demographics that flock to travel cards are six-figure earners (55%), men (32%) and residents in the West (32%).
Nearly half of Americans considering opening new travel credit card
Whether you blame it on inflation pricing or people just looking for a deal, 49% of consumers say they might apply for a travel rewards credit card in the next six months. The percentage is even higher for younger Americans (64% of Gen Zers ages 18 to 25 and millennials ages 26 to 41) and six-figure earners (56%).
"Travel prices are soaring with inflation, and people want to start earning points they can use to travel with their everyday credit card spending," says Sophia Mendel, ValuePenguin credit cards and travel rewards expert. "Many travel credit cards are also offering stellar sign-up bonuses to encourage people to open a new card and earn points they can use to travel regardless of high prices."
While general travel credit cards are the most sought-after, many consumers are also interested in co-branded cards.
"It’s not particularly surprising that hotel cards are slightly more popular than airline cards right now because flight cancellations, delays and high costs may be deterring some travelers from flying," Mendel says.
She also suspects that more consumers may be opting to drive to their travel destinations but will still need to stay in a hotel.
In general, Americans seem to prefer general-purpose rewards cards where their points or rewards can be put toward a variety of travel types, versus branded cards where rewards can only be used with that brand. However, Gen Zers are the most likely generation to show some brand loyalty, with one quarter preferring branded cards, versus 13% overall.
Zoom out: Who’s using travel cards?
Travel rewards credit cards are hardly just for points chasers these days, considering 27% of Americans have one. They’re even more popular among six-figure earners (55%), Gen Zers (40%), men (32%) and residents in the West (32%).
Nearly a third of travel credit cardholders overspent to get sign-up bonus
One of the major attractions to travel rewards credit cards is generous sign-up bonuses, with 45% saying a bonus was the main reason they applied. A sign-up bonus usually rewards cardholders with a set amount of points or miles if they can meet a minimum spending requirement by a specified date. For example, a card may offer 50,000 bonus points if you spend $1,000 within the first three months of card opening.
"Sign-up bonuses are always primary motivators when it comes to consumers choosing and signing up for a new rewards card, which is why so many credit card issuers employ high bonuses to attract new business," Mendel says.
In fact, 79% of travel cardholders say their issuer offered one. And during this period of inflation, you may notice more issuers raising the bonuses on some of their cards to attract new consumers, Mendel says.
It’s important to carefully consider the spending minimum, however, since you don’t want to overspend to earn your bonus, as 32% of survey respondents say they did. Cardholders in the Northeast (42%) are even more likely to spend beyond their means.
Mendel recommends you plan to put all your spending for the designated period on that specific card. If that still won’t get you to the bonus, you may want to choose a different rewards credit card with a more attainable bonus instead.
"No bonus is worth going into debt over," she says.
On the positive side, 83% of cardholders who earned a sign-up bonus used at least some of it. Men are more likely than women to use their full bonus (55% versus 37%, respectively).
Travel rewards can help combat rising vacation costs, and many cardholders are looking for ways to earn even more
The desire to earn rewards to fund future travel is the No. 1 reason consumers open travel rewards cards, followed by a sign-up bonus. Baby boomers ages 57 to 76 (33%) and Gen Xers ages 42 to 56 (26%) are most interested in perks like free check bags, while Gen Zers (35%) most appreciate travel insurance benefits.
To maximize their rewards earning potential, more than half (54%) of cardholders pay for more than just travel expenses with their travel rewards card, including 30% who consider it their primary credit card.
In other words, you could be earning points towards travel every time you swipe.
Another popular strategy for generating travel rewards (like airline miles) is to buy them, as 68% of travel credit cardholders say they’ve done. But it may not also be a great deal, Mendel warns.
"I would only recommend buying miles or additional travel rewards points if you’re very close to having enough miles for a flight (or points for a hotel stay) and just need a few more," she says. "However, if you need to buy a ton of miles to reach a free fare, it likely won’t be worth it to buy them as buying miles is quite expensive."
Spending money to earn money — how consumers feel about annual fees
Travel rewards cards with annual fees often offer more lucrative rewards opportunities and benefits, and 62% of respondents say they currently have such a card. To maximize that spend, however, it takes a bit of work on the cardholder’s part to make sure they’re using the card’s perks. The good news is the majority of consumers with these cards say they keep track.
Among all survey respondents — not just those with travel cards — 46% say they aren’t willing to pay an annual fee for a travel rewards card, however.
"There are still plenty of great no-annual-fee travel rewards cards that earn points and miles," Mendel says. "That said, for annual fees as low as $95, you could be getting exponentially better rewards depending on the card."
One example is the Chase Sapphire Preferred® Card, which has a $95 annual fee and earns competitive rewards across a broad range of spending categories.
Some groups are more willing to pay an annual fee than others, including high earners (64%). In fact, nearly 1 in 5 of those earning $100,000 say they’d pay $500 or more for the right card.
Age-wise, Gen Zers are more open to annual fees than any other generation, as only 16% say they aren’t willing to take on an annual fee, and 37% would shell out $300 or more.
"Younger cardholders may be open to paying higher annual fees because they know they’ll be able to use the numerous perks and benefits that come with high fee rewards cards," Mendel says. "If you’re able to make use of perks like free checked bags, airport lounge access and various travel and lifestyle credits, the value of the benefits often outweighs the cost of the fee."
5 things to consider when applying for a travel rewards credit card
Ready to start earning rewards toward your next trip? Here are some factors to think about when looking for a travel credit card to fit your needs.
- Your travel and spending style: Are you an occasional road tripper? A frequent flier? A once-a-year family tripper? "You’ll want to consider whether you’re willing to pay a high annual fee for luxury perks and benefits, or if you’re OK with more common benefits for a lower (or no) annual fee," Mendel says.
- If you’re brand loyal or want more flexibility: If there’s a single hotel chain or airline you love and use often, you could benefit from a co-branded travel card, Mendel says. However, if you prefer a more flexible approach, focus on general travel rewards cards.
- Bonus, fees and other terms: "The annual fee and sign-up bonuses are always key factors when choosing a travel rewards card," Mendel says. She recommends that you make sure you can afford the annual fee, and that you’ll be able to meet the spending requirement for a sign-up bonus before deciding on a card.
- Additional benefits: Travel rewards cards often come with additional benefits like no foreign transaction fees, travel and purchase protections, free checked bags, airport lounge access and sometimes a 0% intro APR offer. These types of perks can help you narrow down your selection.
- What’s already in your wallet: If you’re a more advanced travel card user, you’ll need to consider how many other credit cards you own and have recently opened. Some issuers, like Chase for example, have limits that won’t allow you to have more than a certain number of credit card accounts open at once, Mendel explains. For example, Chase’s unwritten "5/24" rule states that if you’ve opened more than five personal credit cards in the past 24 months, you won’t be eligible to open a new card with them.
ValuePenguin commissioned Qualtrics to conduct an online survey of 1,008 U.S. consumers, fielded June 17-20, 2022. The survey was administered using a nonprobability-based sample, and quotas were used to ensure the sample base represented the overall population. All responses were reviewed by researchers for quality control.
We defined generations as the following ages in 2022:
- Generation Z: 18 to 25
- Millennial: 26 to 41
- Generation X: 42 to 56
- Baby boomer: 57 to 76
While the survey also included consumers from the silent generation (those 77 and older), the sample size was too small to include findings related to that group in the generational breakdowns.
The information related to Chase Sapphire Preferred® Card has been independently collected by ValuePenguin and has not been reviewed or provided by the issuer of this card prior to publication.
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).