And what's the difference between a travel credit card and a regular credit card?
If you're preparing for a trip, whether it's for a few days or a few months, you've doubtless seen the advice pop up on any number of travel blog: get a travel credit card!
Of course, like any travel blog (including Only A Bag), they're trying to sell you something. In this case, it's a sign-up bonus for them and you. However, it does beg the question: do you need a travel credit card?
Well... no. Not really.
First, let's (very briefly) look at what a travel credit card is, then we will talk about the pros and cons.
What is a travel credit card?
Simply put, it's a card that will accrue miles, points, or [rarely] cash back that you can use for flights, hotel stays, cruises, upgrades, or any other perks that are related to traveling.
(Briefly, I say these cards rarely offer cash back because most travel credit card prefer to get you into their "ecosystem" and so it's better for them if you use points or miles that can only be used for travel, whereas cash back can be used for anything.)
Some travel credit cards are branded through airlines or hotels (like the Delta card is an American Express with Delta branding, allowing you to accrue points that can be used within the SkyTeam ecosystem) while others (like Capital One and Chase) allow you to redeem the points for any airline or hotel, though be careful, it's not always one-to-one.
With this out of the way, let's jump right in. Why shouldn't you get a travel credit card?
Cons of a travel credit card
Starting off with the cons rather than the pros, travel credit cards often have a few downsides. The first is the cost. Taking a look at this list (Nerdwallet's Best Travel Credit Cards), you might notice something that nearly all of them have in common: the yearly fee.
For the privilege of using these travel credit cards, you must pay roughly $100 to $700 a year, depending on the card you apply for. Now, with some of the card like Capital One's Venture card, the $395 yearly cost isn't as bad as it looks since you will receive a $300 travel credit through Capital One's travel portal every year, meaning it's really only a $95 yearly fee if you travel at least once a year. And, if you don't already have Global Entry/TSA Pre-check, then you can get a $120 credit towards either of those programs (a $24-a-year benefit since each of those programs last 5 years per application). And, if we want to take this a step further, you get 75,000 miles (at the time of writing this) when you sign-up and spend $4,000 on purchases in the first 3 months of opening the account, which they say is a $750 value. So, in theory, the card only costs $76 a year, and if we factored in that sign-up bonus, the card is "free" for the first 10 years. That's if you can swing the $395 a year and have no trouble spending $4,000 in the first 3 months on purchases.
However, this all begs the question: what if you don't get that credit? What if you only get approved for the $95 a year credit card that doesn't have as generous benefits?
For those of you who have closed out of a credit card account either on purpose or accident, then you know your credit score takes a pretty hefty hit when you close a line of credit. So once you sign-up for one of these cards, you're on the hook for that yearly cost until closing it won't affect your score too much or until you don't care about the credit score hit.
Another con is method of use. To really maximize the points you receive, you are pretty much locked into using the travel portal for the credit card you signed-up for. So, Capital One Travel for the Capital One cards and so on. Usually, you receive 4-5x points for each dollar spent on their portal versus 1-2x points per dollar spent on a flight aggregate like Expedia. Which means, if you found a cheaper flight somewhere else, you won't always benefit the most by purchasing it.
Now, I'd be remiss if I didn't mention the fact that most of these credit cards have price-match guarantee, but this usually involves a phone call, an email, screenshots, and in nearly every case, the agent on the phone has to be able to verify the price by getting the same price to show up for them. You can't just take a screenshot of Expedia, send it over, and collect the difference. If the agent goes to Expedia and doesn't get the same price, then you don't get the money back. This is only important in terms of cookies (as in computer cookies). It's a common practice to search flights from a provate/incognito window, or to first clear cookies before searching because some websites will see that you're looking for flights within certain days or times and subtly bump up the cost, which means that it's not entirely uncommon for two different computers to get two different prices for the same flight.
Pros of a travel credit card
Most travel credit cards take their normal travel coverage and really ramp it up. Missed flight coverage, missed connection, travel insurance, bag insurance, theft insurance, rental car collision insurance, pretty much everything you might need.
However, the biggest benefit of a travel credit card is the lack of a foreign transaction fee, which is a fee imposed by many banks for using your card while abroad. This is often a percentage of the total rather than a flat rate. T
Foreign transaction fees
To me, this is the number one reason someone should ever use a credit card. Because we (Darcy and I, not you and I, dear reader) spend a decent portion of the year abroad, anywhere between 5 and 12 months, it's nice that not every single purchase is 3% more expensive. And I know what you're saying, "It's only 3%, who cares? Probably less with the cash back/points." And you're right.
If you paid 3% of foreign transaction fees, then this pizza wouldn't cost 5 euros, but 5.15. Think about it. After buying 34 pizzas, you could buy another whole pizza with that savings, but only if you have a card that doesn't charge foreign transaction fees. And doesn't this feel like a math class problem?
However, I don't love paying extra money for anything if I don't have to, and when it comes to giving a bank an extra 3% on all my purchases for reasons unknown, then I really don't like it.
This also applies to American websites accessed while abroad (for example, if you decide to book a stay on Airbnb while in Italy, even though you're booking through the American site, your card will still charge you a foreign transaction fee based on the total cost). This percentage is typically 3%. While not insanely high, if you use one of these cards for a $700 AirBnB stay, you're adding an extra $21 to the cost. Again, not a ton, but it's money you don't have to spend.
Anything else to know?
If I had to leave you with anything, it would be this: don't pay a yearly fee for a travel credit card unless you know you'll be traveling at least twice a year. While the perks seem great on paper, you're not the only one who is going to be fighting for those, which is why you can sometimes see the TSA Pre-Check line longer than the regular security line, or the wait times for the lounge more than an hour.
You'll be stuck with the card until you bite the bullet and cancel it or get the credit card company to switch it to a fee-less card.