Your First Travel Credit Card: How to Choose and Use It Wisely

Understand How Travel Credit Cards Work

Travel credit cards reward you for spending in ways that can be used toward travel. Most cards earn points or miles for purchases, and the value of those rewards depends on how you redeem them. Some cards offer flexible points that can be transferred to multiple airline and hotel loyalty programs, while others earn rewards within a single program.

Before diving into the features, it's helpful to know that credit card rewards are a form of incentive issuers offer to encourage spending. According to the Consumer Financial Protection Bureau, rewards on general-purpose credit cards exceeded $40 billion in 2022 for mass market issuers. But rewards programs can be complex, and consumers may forfeit rewards value if they don't understand the rules.

Sources: Consumer Financial Protection Bureau

Evaluate Your Credit Standing

Your credit history plays a major role in which travel cards you can qualify for. Issuers review your credit score and report to decide whether to approve you and at what terms. If you have no credit history or a limited one, you might need to start with a secured card or a card designed for beginners before applying for a premium travel card.

While specific credit score requirements vary by card and are not listed in the research, it's wise to check your credit report for errors and understand your current standing. The CFPB reports that people with the best credit scores typically pay their credit card bills in full each month.

If you're new to credit, focus on building a positive payment history and keeping your credit utilization low. Experts advise keeping your credit utilization at 30% or less of your total credit limit, as noted by the CFPB.

Sources: Consumer Financial Protection Bureau

Determine Your Travel Spending Habits

Think about how often you travel, where you go, and what you spend on. Do you prefer flexibility to book any airline, or are you loyal to a specific airline or hotel? If you only fly once a year, a card with a high annual fee might not be worth it. If you travel frequently, rewards can add up quickly.

Consider the types of purchases you make most. Some cards offer bonus points on dining, flights, or hotels. A card that earns bonus points on your everyday spending can accelerate your rewards, even if you travel less often.

• How many trips do you take each year?
• Which airlines or hotels do you prefer?
• Do you want flexibility to book anywhere, or are you loyal to one brand?

Sources: NerdWallet, CNBC Select

Compare Card Types: General vs. Co-Branded

Travel credit cards generally fall into two categories: general travel cards and co-branded cards. General-purpose travel cards offer points that can be transferred to multiple airline and hotel loyalty programs, giving you more flexibility. Co-branded cards are tied to a specific airline or hotel chain and earn rewards in that program, which can be valuable if you're loyal to that brand.

The right choice depends on your travel patterns. If you don't have a strong preference for one airline, a general travel card may suit you better. If you consistently choose the same airline or hotel chain, a co-branded card lets you concentrate your spending in that single loyalty program.

Sources: NerdWallet, Our Family Passport, Visa, CNBC Select

Look for No or Low Annual Fees

For your first travel card, paying an annual fee might feel like an obstacle. Many travel cards have no annual fee, but some popular ones, like the Chase Sapphire Preferred and Capital One Venture Rewards, come with a $95 annual fee. That fee can be worth it if the rewards and perks you earn outstrip the cost, but you need to calculate that for your own spending.

If you're just starting out, a no-annual-fee card can be a safer choice because it avoids the pressure of having to earn enough rewards to offset the fee. Over time, as your travel increases, you can consider a card with an annual fee if it offers better rewards.

Sources: Our Family Passport, CNBC Select

Check Foreign Transaction Fees

When using a credit card abroad, you may be charged a foreign transaction fee, typically a percentage of each purchase. Many travel cards do not charge foreign transaction fees, which can save you money on trips outside your home country. The CFPB explains that this fee is a cost associated with using cards abroad, though its context is prepaid cards.

Before choosing a card, check whether it charges foreign transaction fees. The two popular beginner cards featured above both have no foreign transaction fee, making them convenient for international travel.

Sources: Consumer Financial Protection Bureau, NerdWallet, Our Family Passport

Consider Welcome Bonuses and Requirements

Many travel cards offer welcome bonuses: you earn a large number of points or miles after spending a certain amount within a specified period. A welcome bonus can give your rewards balance a significant boost, but it often requires a minimum spending threshold. Make sure the spending requirement is achievable for you without overspending.

For example, the Chase Sapphire Preferred and Capital One Venture Rewards typically have welcome offers, but specific amounts change frequently. Always check the current terms on the issuer's website before applying.

Sources: Visa, CNBC Select

Understand Ongoing Benefits and Perks

Beyond earning points, travel cards may offer benefits that add real value. A common and valuable feature on many travel cards is the absence of foreign transaction fees, which directly supports international travel. Another important aspect is the flexibility of redemption options: general travel cards often allow you to book through a travel portal or transfer points to multiple airline and hotel partners.

When choosing a card, review the issuer's current benefit guide to understand exactly what perks are included, as they can vary widely. Focus on the benefits that match your travel style and spending patterns.

Sources: NerdWallet, Our Family Passport

Plan How to Redeem Rewards

Redeeming your rewards is where you can maximize value, but redemption can be complex. The CFPB reports that consumers may forfeit rewards value if they don't understand the program's rules. Some cards allow you to transfer points to multiple airline and hotel partners, which can increase the value of your points. Others have simpler options like statement credits.

Take time to learn the redemption options of your card. Understanding the program's terms and available partners is essential to getting the most value from your rewards.

Sources: Consumer Financial Protection Bureau

Common Mistakes to Avoid as a Beginner

As a first-time cardholder, it's easy to make mistakes that cost you money or harm your credit. Here are some common ones to avoid: carrying a balance and paying interest, missing a payment, and applying for too many cards at once.

The CFPB advises paying your credit card bills on time to build and maintain good credit. Ideally, you should pay off your balance in full each month to avoid interest charges and keep your credit utilization low. Missed payments can hurt your credit score and lead to late fees.

Avoid applying for multiple cards in a short period, as each application can result in a hard inquiry that temporarily lowers your score. Take time to research and choose one card that meets your needs.

1. Pay your bill on time every month.
2. Keep your credit utilization below 30% of your limit.
3. Pay off your balance in full each month to avoid interest.
4. Don't apply for too many cards at once.

Sources: Consumer Financial Protection Bureau