8 reasons you should throw away your cash-back credit card if you love to travel

This reader post is from Hilary Stockton, who is the founder of TravelSort, which helps savvy travelers earn millions of miles without flying, redeem them for first-class flights, and stay in luxury hotels at wholesale prices. Follow her on Twitter @TravelSort.

My husband and I used to think we were savvy, using a cash-back credit card for most of our spending. But given how much we enjoy international and luxury travel, it was actually a huge mistake. We now strategically apply for travel credit cards that offer attractive sign-up bonuses and we direct our spending to the credit cards that offer the best category bonuses for the type of purchase we're making. Here's why:

1. Travel first class or business class internationally

Thanks to four credit card applications, we were able to book two first-class round-trip award tickets on Cathay Pacific to Bali, via Hong Kong, for this past summer. These tickets retail for more than $20,000 each, which we would never pay cash for, but the experience was fantastic and was a memorable part of our vacation. And because we know how to use credit cards to our advantage, this isn't just a once-in-a-lifetime experience—we plan to travel first class or business class internationally at least once a year, with the miles and points we're earning. And thanks to using miles and points for award flights, we're able to use our trip budget for some incredible hotels, restaurants, and unique local experiences that otherwise would have been a stretch to afford, if we had to pay for airfare.

TravelSort- Cathay Pacific First Class Seat

First Class Seat, Cathay Pacific

2. Fly great airlines: Lufthansa, Cathay Pacific, Singapore Airlines, Qatar and others

If we were talking about domestic first class or even first or business class internationally on most American carriers, it would be hard to get too excited. But the great thing about the United Airlines and American Airlines miles and points you earn is that they can be redeemed on Star Alliance and oneworld airline partners, respectively, such as Lufthansa, Singapore Airlines, Asiana and others in Star Alliance, and Cathay Pacific, Qatar, Etihad and others in oneworld. These are among the very best airlines in the world, with seats or suites, dining and service to match. Your credit card miles and points can get you access to award seats that let you travel for just the cost of taxes.

Cathay Pacific First Class Caviar

Caviar Appetizer, Cathay Pacific First Class

3. Be better rested at the start and end of your trip

Flying in a cramped coach seat on a long-haul flight isn't the most restful or relaxing way to start or end a vacation. Picture instead having your seat turned down into a flat bed more than 6 feet long, with a comfy duvet and complimentary pajamas, so that you can stretch out and sleep en route. By arriving more rested, you'll lose less of your vacation being sore and sleep deprived. Similarly, when it's time to fly home and return to work, you'll actually be able to look forward to the flight and either start to productively get caught up on work, or nap so that you arrive refreshed.

Lufthansa First Class Bed

Lufthansa First Class Bed

4. Enjoy free nights in 5-star hotels

I won't lie—you won't be getting free nights at the Four Seasons or Mandarin Oriental anytime soon with miles and points, at least not at a redemption value I'd recommend. But you can use hotel credit cards to get two nights at a top Park Hyatt worth $800 or more a night, a night at the Ritz-Carlton, and nights at the best Conrad and Radisson properties worldwide.

Enjoy 2 Free Nights at the Park Hyatt Maldives with the Hyatt Visa

Enjoy 2 Free Nights at the Park Hyatt Maldives with the Hyatt Visa

5. Enjoy elite status perks with airlines and hotels

Ever wish you were an elite frequent flier so you could enjoy the airport lounge, get priority boarding and avoid checked baggage fees? Or that at hotels you could get room upgrades, free Internet and late checkout? You can, with the right airline and hotel credit cards.

View from upgraded room at Le Meridien San Francisco, thanks to SPG Gold Status

View from upgraded room at Le Meridien San Francisco, thanks to SPG Gold Status

6. Get free one-way award flights

Did you know that you can build in a free or cheap one-way award flight across the country or to Hawaii using American or United miles? With a paid ticket, you would, of course, pay for that transcontinental or Hawaii flight, but if for example you've earned United miles with a credit card, you can use a United free one-way to maximize your award.

7. Avoid foreign transaction fees

Most cash back cards carry foreign transaction fees, which you don't want if you're traveling internationally, or you're buying something from a foreign seller such that the transaction gets processed in another country. Even better are the credit cards that provide points bonuses for spend on hotels, restaurants, or other travel expenses while also not charging foreign transaction fees.

8. How much are you actually earning with your cash back card?

If you're like most folks, you're probably not earning more than a few hundred to $1,000 or so a year with your cash-back credit card. With that same spend, some mileage-earning checking accounts and a few more credit card applications between your spouse or travel partner and you, you could earn 1 million miles and points without flying. And those miles and points will take you a lot farther, and in much greater comfort, than what you would have saved with a cash back card.

Do you have tips for maximizing your travel credit cards?

More about...Credit, Travel

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EverywhereOnce
EverywhereOnce
7 years ago

We recently did an in depth analysis of travel reward cards (http://everywhereonce.com/2012/05/16/travel-reward-card-smackdown/) and found that the best ones pay less in rewards than the best cash back cards for every day use. Some caveats: Redeeming rewards for first class travel is a better deal than redeeming them for coach. If you plan on flying first, the reward cards do pay more. But then if your primary goal is to save money, flying coach is always a better deal than flying first class or business. And if your primary goal is travel, you’ll fly more miles and reach more destinations by… Read more »

Hilary
Hilary
7 years ago
Reply to  EverywhereOnce

Thanks for your comment. Even for international coach travel, you’ll often come out ahead with the right travel credit card signup and category spend bonuses. For example, I recently got a an AMEX rewards card that got me 100,000 Membership Rewards points for $3000 spend. If you were able to get 3% cash back for that spend, that would be $90. Instead, the 100,000 points, when transferred to Singapore’s frequent flyer program, get you a roundtrip coach ticket NYC-Singapore that normally is over $1600, or a roundtrip business class ticket NYC to Frankfurt that retails for over $5000. Either way,… Read more »

Anne
Anne
7 years ago
Reply to  EverywhereOnce

Yes, of course it’s the sign up bonuses that make it worthwhile, otherwise it’s a pittance.

This last year my spouse and I have flown free to New England, Europe, Florida and the Pacific Northwest. We have had 9 free hotel nights. These were all from sign up bonuses and we have more plans this year.

We don’t pay a nickel in interest and have excellent credit scores.

My Financial Independence Journey
My Financial Independence Journey
7 years ago

I’ve always used a cash back card, but I never considered a travel card. While I was a grad student or a postdoc I never had the money to travel out of the country so I guess it never crossed my mind. But now that I have job that pays enough to satisfy my travel urges this is something I should look into.

Hilary
Hilary
7 years ago

Thanks, hope the post is food for thought. I also used to just use cash back cards, and didn’t really pay attention to the travel rewards cards. But over the course of earning over a million miles and points and booking first and business class international award travel for my family and others, I’ve come to realize the value. The main caveats are that you should only be doing this if you have no high interest debt of any kind, pay your credit card bills off in full, and aren’t about to apply for a mortgage or refinancing. More about… Read more »

Chasa
Chasa
7 years ago

I don’t like these types of posts. Tells you what you could do, but not how. I’d rater one bullet point with specifics (which cards, how much did they spend on the cards over what period of time, what were the ‘rules’, like did you have to hit spending targets in specific categories, etc), than an 8 bullet point infomercial.

Hilary
Hilary
7 years ago
Reply to  Chasa

Thanks for your comment. This was actually intended as an intro to a series of “how to” posts, pending reader interest in understanding more specifics.

Nihongo Dame Desu
Nihongo Dame Desu
7 years ago
Reply to  Chasa

I agree. This is worthless. “Hey! There are ways to spend a ton of money on great travel!”

Was GRS hard up for content today? And I am using the term “content” rather loosely, since this tells us nothing.

PB
PB
7 years ago

if you click on her link to her website it has a step by step breakdown of how to get up to 1 million points in a year.

Andy
Andy
7 years ago
Reply to  Chasa

What you’re asking for would be very difficult. The very first thing to do is go to all the airlines, hotels and car rental agencies and sign up for their rewards programs. Also, a lot of it depends on you; where you live, where you’d like to travel and things like that. If you fly out of Atlanta, you’d want to get a Delta card, if you fly out of Houston, you’d want to get a United card because those airports are hubs for those airlines. If your place of employment requires travel for some employees (maybe not you) find… Read more »

Ingrid
Ingrid
7 years ago
Reply to  Chasa

I agree with 3 and 4 – this seems to be just an advertisement for her own blog. The article doesn’t give any suggestions on how to achieve what she describes so nicely.

Evan
Evan
7 years ago
Reply to  Ingrid

Geez, get off your butts and do some research. It’s not rocket science. Do you have to be spoon fed the info?

It’s worth a ton of money so stop whining and start with her blog and go from there.

Ingrid
Ingrid
7 years ago
Reply to  Evan

Evan, I think you miss the point. Yes, of course, I can do my own research, but why would I read GRS then if all it does, is give me pretty pictures of the author’s vacations and no real info. Isn’t that what GRS is supposed to do?

Christine
Christine
7 years ago

Wish we had great travel reward cards in Canada!

Lynn
Lynn
7 years ago

I will admit I am now a miles/point junkie. My next trip to Europe next Feb will be almost free airfare and free hotels for 12 nights and the next trip after that will be business class to Asia. If you are really interested in seeing what miles and points can do, you need to explore Flyertalk.com and Milepoint.com and start reading some of the blogs. My favorites are pointsguy.com, frequentmiler.com, frugaltravelguy.com and milevalue.com. Many of the blogs have frequent postings for how to start in the miles and points world. The biggest thing about miles and points with credit… Read more »

Michelle
Michelle
7 years ago

I need to get a travel rewards card. Right now we’re working on making our credit perfect though for when we buy our next house in 2014.

Lucas
Lucas
7 years ago

This has nothing to do with increasing net worth, but everything to do with trying to get extreamly expensive and unnessisary things for slightly less (the whole look how much I saved while spending a ton trap). Maybe if you gave some numbers about how much you actually spent (real $s) in a year and how much you got free we could tell if it was worth it. My guess is it is not. I have looked at a lot of the travel cards as well as the cash ones and agree with the poster about the cash cards being… Read more »

Lindsay
Lindsay
7 years ago
Reply to  Lucas

My mother-in-law lives in Europe and I live in the US. International travel is a necessity in my house. If you’ve flown coach with an infant AND a toddler, you might think that flying business class is a necessity too! I’m very interested in this post and subsequent how-to for getting free miles.

Hilary
Hilary
7 years ago
Reply to  Lindsay

Lindsay, I couldn’t agree more, since we travel with a young child as well and have taken him on several long international flights. While some will always be opposed to kids in business and first class, for us it’s worked well, enabling us all to actually sleep on the flight and better ensure he stays well fed, happy, quiet and isn’t disruptive to other passengers. We no longer worry about or dread the flight experience. Look forward to helping you and others interested in earning and using miles and points for travel.

cbkcc1
cbkcc1
7 years ago
Reply to  Lucas

you know, you can have both cards (some people have 15), but if you don’t have at least one cash back card you aren’t doing it right. if you are a cash only person and can’t budget yourself with a CC that is one thing. but if not you are just throwing money away. the idea of a travel card is say you wanted an NYC to LA ticket which is normally $275 but the dates you want it is $350, you can use 25,000 mile and book it. obviously black out dates and other things come into play. or… Read more »

Hilary
Hilary
7 years ago
Reply to  cbkcc1

Thanks for your comment; I agree that if you don’t value international travel at all, a cash back card likely makes more sense. My family doesn’t use a cash back card at all because we highly value international travel in business and first class, so we get more value out of applying for and putting all our spend on travel rewards cards. We rarely travel domestically, and when we do, a cash ticket (paid for with a card earning 3X points) is usually a better value for us than redeeming points for it. I usually advise my clients to aim… Read more »

Pauline
Pauline
7 years ago

I have a card with 0% transaction fees, which is perfect because I spend a lot of time out of the country. Unfortunately there are no travel rewards, european card are rarely as good as US!

LauraElle
LauraElle
7 years ago

Who wrote this, Ellen Cannon or Hialry Stockton?

Elizabeth
Elizabeth
7 years ago
Reply to  LauraElle

It may be a quirk of web publishing. Many websites are set up so that the name of the person who enters the content into the content management system shows up as the byline. (i.e. “by Ellen Cannon”). Guests don’t have access to the CMS so an editor has to post their articles for them, ergo, Ellen’s name shows up in the byline and then there’s an author byline below.

Andrew
Andrew
7 years ago

I had a CapitalOne “No Hassles” mileage reward card I stopped using in 2009 and it took me 3 years to use the miles at maximum value (1% of the cash spent to accrue them). I’d rather just have the 1% cash.

I can see benefits to points/miles cards if you use the signing bonuses…but I have enough credit cards open…I’m working on increasing my average account age so I don’t want to close them and open new ones.

Hilary
Hilary
7 years ago
Reply to  Andrew

Andrew, thanks for your comment. I completely agree with you that the Capital One card isn’t worth it, and mentioned it specifically in my post today as a fixed value award program to avoid, both for the low value of the rewards and because it pulls your credit report from all 3 credit bureaus: http://travelsort.com/blog/how-many-credit-inquiries-or-hard-credit-pulls-is-too-many What’s much better in my view is to leverage the best transfer opportunities of programs such as Chase Ultimate Rewards (points transfer 1:1 to several airline and hotel programs, with United and Hyatt as the best value uses) and AMEX Membership Rewards, which also transfers… Read more »

Jeff
Jeff
7 years ago

Not sure if these are the sort of “specifics” people are looking for, but here’s how we used airline/hotel points, mostly from sign-on bonuses, to plan an around the world trip for my family of four:

http://www.kidsmeetworld.com/2012/08/rtw-with-air-miles-math.html

Cat
Cat
7 years ago

I’m glad I ran into this post. I was thinking about signing up for the JetBlue card? I never travelled much but last year I traveled with my rally team to canada, arizona, and california. Then went to 3 weddings and booked flights to miami and orlando! I wonder if it would have been beneficial to have a points card. I get rewards with Jet blue but the card itself would give me a nice bonus… and then points for every dollar! hmmmm

Greg
Greg
7 years ago

This really is a question of what you are spending your money on. If you stay at Marriott’s frequently, get a Marriott card and use it when you make reservations. Fly Delta often? Get a Skymiles card and use it when you book your flights. This works because you get a point multiplier when you use the Delta card on the Delta website to buy delta tickets. The same for Marriott and many others. In this situation, the value of the points can be a lot higher than a cashback 2%. If you don’t actually travel a lot but want… Read more »

Emily
Emily
7 years ago

Great tips, thanks for posting. All the travel info is really relevant for me right now.

MichaelP
MichaelP
7 years ago

I think cash back cards (capital one, citi thank you points, amex blue cash, etc) are a good way to cut down the overall cost of travel such as using them for statement credits on train, bus passes, tour tickets, food, etc and other costs that miles cannot be used on. Save the miles/points for use where they are more valuable such as flights and hotels.

Jose
Jose
7 years ago

Her’s another potential reason to ged rid of a cashback card. Stating Jan 27 2013 Merchants can start hitting you with a surcharge on credit card transactions. This really applies to all credit cards and just cash back cards. Just thought I’d spread the word. thefindependent.com/beware-of-new-credit-card-surcharges-as-of-january-27-2013/

Lindsay
Lindsay
7 years ago

I have what is probably a stupid question, but I’m having a hard time understanding the concept of miles as opposed to cash. If you open a card and get bonus miles and then cancel the card, do you keep your bonus miles? Where are they stored? How does the airline know that you have them, when it’s time to book your flight or upgrade your seat?

Dan
Dan
7 years ago
Reply to  Lindsay

Lindsay,

Miles are a fiat currency that the airline or hotel holds for you in an account with your name on it.

You keep the miles, even if you cancel the card.

All airline-specific cards hold the miles with the airline. American Express and Chase both have their own proprietary programs, where the bank itself actually holds the miles for you. But the strength of both programs is that they both have a substantial number of partners where you can transfer your miles to.

Hilary
Hilary
7 years ago
Reply to  Lindsay

Lindsay, as Dan mentioned, cards that earn specific miles or hotel points keep them in that program, whereas AMEX Membership Rewards and Chase Ultimate Rewards are flexible programs that hold points that you can transfer out to various airline and hotel partners. While airline programs partner with hotels and vice versa, in most cases it’s not worth transferring out due to poor transfer ratios; the main exception is Starwood Preferred Guest, which enables you to transfer to a number of airline programs with a 25% bonus if you transfer in increments of 20,000 points. I would definitely caution you agains… Read more »

Kelly@Financial-Lessons
7 years ago

Good ideas. Foreign transaction fees can actually end up costing you a good amount of money so if you can avoid those (on top of gaining the rest of these perks) it would be beneficial in the long right to throw away your cash-back credit card for travel anyway.

Krishanu
Krishanu
7 years ago

I’m curious to know about the “mileage-earning checking accounts” mentioned in the last paragraph of the post. What are these?

“With that same spend, some mileage-earning checking accounts and a few more credit card applications between your spouse or travel partner and you …”

Hilary
Hilary
7 years ago
Reply to  Krishanu

Krishanu, thanks for your question. The mileage account I use is via BankDirect, which enables me to earn American AAdvantage miles. Please see http://travelsort.com/blog/bankdirect-best-way-to-earn-aadvantage-miles-for-half-a-cent-per-mile

Jonathan
Jonathan
7 years ago

Hilary,
We fly every other year to South Africa and changes to Delta’s Skymiles plan has made it more difficult to earn enough miles for each trip. Unfortunately Delta is nearly the only carrier that offers non-stop service to SA; which is important to us since we fly with young children now. I’m currently waiting on an upgrade offer for the Delta Skymiles card. Is there anything else you can recommend to help us pick up bonus miles/rewards? It looks like most of the nice bonuses are non-Delta. Thanks!

Hilary @ TravelSort
Hilary @ TravelSort
7 years ago
Reply to  Jonathan

Jonathan, thanks for your comment. If you need the nonstop Delta flight from ATL, then I’d try to ensure that both your wife and you get a good bonus offer for the Delta Skymiles card. There was a 45K preapproved offer, pls. see the link towards the end of this recent post: http://bit.ly/16F3Q1T As I also mentioned in that post, you could fund a Fidelity brokerage account for up to 50K Delta miles, and the other options are to transfer miles from SPG with a 25% bonus when you transfer in increments of 20K SPG points, or 1:1 transfer from… Read more »

Sudarto
Sudarto
5 years ago

A very great experience. You can both use a special flight with credit card points you collect. In fact, you don’t take the cash back you got.
You exchanged them with points in order to collect a lot of points to be sufficient to overseas tours or other trips.
This is a great tactic to collect a lot of points from a credit card. I think this is an enviable way.

Alex
Alex
5 years ago

You’re “strategically” applying for a new CC every time you want to travel? What’s you Credit score, Ellen?

Alix
Alix
3 years ago

I know someone who does this quite often and his credit score is 760. It doesn’t hurt it if you do it correctly and pay off your balances.

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