Guide to travel rewards | Fidelity (2024)

Get the most from these rewards cards.

How do travel rewards work?

Travel reward programs function on a simple premise: You earn points or miles by spending on a designated credit card. Depending on the specific card, transactions such as booking flights or hotel stays through partner companies can earn you these points. Some cards even offer points on everyday purchases, like groceries or gas, or for every dollar spent. You could even earn bonus incentives by signing up (these are called introductory offers) or by passing a spending threshold on certain types of purchases.

Once you've accumulated enough points, you can then spend them on benefits within your travel rewards programs, such as flights, hotel stays, upgrades, and more, depending on the program. And these points can add up to some serious savings. Although it's tricky to assign a specific dollar value to points (more on that later), a 2023 survey found that the average travel card holder had a balance of over 50,000 points.²

If these rewards would act as a coupon for your current spending habits, a travel rewards credit card could be a good financial move if you'd save more than the annual fees and pay off your balance each month. But if one of these credit cards would encourage you to spend more than you would without it, then a travel rewards program may end up costing you more money than it saves.

Travel rewards and credit card features to consider

Every travel rewards program is unique, but here are some common features to consider when trying to score travel rewards with a credit card.

Annual fees

An annual fee is the cost of owning a travel rewards credit card and reaping the benefits that come with it. Not all travel rewards credit cards have annual fees, but those that do can range from less than $50 to more than $500.³ While these fees may sound like a drawback, they often correlate with enhanced benefits and rewards potentially including lucrative sign-up bonuses, complimentary travel insurance, and airport lounge access, to name a few.

Before committing to a card with an annual fee, it's important to do a cost-benefit analysis first. Weigh the value of the benefits against the annual fee and decide whether the card would save you money, based on your spending habits and travel aspirations. Also, keep an eye out for waived annual fees in the intro period enabling you to test-drive the card's features without an immediate financial commitment. An introductory bonus offer may cover a card's annual fee for one year, for example, which could be a good trial run to see if the card's perks are worth it.

Initial spend/sign-up bonuses

Sign-up bonuses are an incentive to join a credit card travel rewards program. These bonuses typically come in the form of points or miles awarded to your account—commonly in bulk, at one time—after meeting a minimum spending requirement in a specific timeframe. It gives you a head start on accumulating rewards and can help justify an annual fee (if there is one). Like many promotions, rewards for new cardholders can change at any time, so keep in mind that an offer you see today could be different tomorrow.

And while the allure of a boatload of points may seem irresistible, read the fine print so you know up front whether the required spending aligns with your budget and financial habits. Ultimately, sign-up bonuses (and travel rewards in general) are designed to encourage you to spend more on a given card. This gamification of spending may seem exciting, but it can also foster bad financial habits if you aren't careful. A good guideline to help keep spending in check is to never put more on a credit card than what you can pay off when the bill comes. If the card offers a reward for signing up, consider the long-term value beyond that initial bonus.

Cash-conversion rate for points

Once you've narrowed down your travel rewards program options, get a rough estimate of the cash conversion rate for points or miles. Some programs allow you to directly convert your points to cash and pay down your credit card bill, in which case, the point-to-dollar ratio shouldn't be too hard to figure out. But many don't, only allowing you to spend those points or miles to book travel.

The value of your points or their redemption value aren't always a one-for-one exchange. Online calculators are one way to check whether a specific rewards deal is a good one.

Although it varies from card to card, points may have more lucrative redemption values for some rewards over others. For instance, booking travel through the card issuer's portal might mean 100,000 points gets you a $100 flight—but booking that same flight on another platform might cost 150,000 points. If this sounds confusing that's because it is, and each program has its own incredibly nuanced points exchange program. Online communities for travel rewards points could be another resource for decoding the points value for your specific program and getting info about how other travelers have used their points.

Foreign transaction fees

A foreign transaction fee is an extra charge added to transactions that aren't in US dollars. This includes charges on the ground in another country and purchases online from retailers that work in different currencies. Although these fees vary from card to card, they usually range from 1% to 3% of the transaction.⁴

If all your travel is domestic or in countries that use US dollars, you won't have to worry about these fees. But if you plan to travel internationally, you might want to look for a card that waives foreign transaction fees. This will ensure that you're not charged extra for that croissant in Paris or for those souvenirs in Tokyo.

General travel vs. specific travel company rewards

Some travel rewards programs are tied to a specific airline or hotel, while others reward you for spending no matter who you book with. If you always book with a specific airline, stay at one brand of hotel, or use a specific rental car company, you could get more value for your points—or earn more points—if you use that company's travel rewards credit card.

Transfer point programs

Many general travel rewards credit cards let you transfer their points to loyalty programs at different hotels and airlines, which you can then redeem for hotel stays and flights. These exchange programs tend to have a higher redemption value than programs offering cash back and, by most estimates, are the best way to maximize the benefits of a travel rewards credit card. Keep in mind that credit card companies have different exchange rates for each hotel and airline partner, so you'll have to determine on a case-by-case basis whether an exchange program is worthwhile for your specific card.

Airport perks

Airport lounge access is a popular perk for travel rewards credit card holders, especially those who travel often. Some programs will also cover the cost of programs that make getting through airport security easier. Consider the annual fees associated with each card and whether these perks would cost less if you paid for them with cash—and without paying for the card.

Consider general cash-back cards

Making the most of a travel rewards program can be a lot of work. Not to mention, travel rewards points can't always be easily redeemed unless you plan to travel. If you're looking for a less fussy and more liquid way to earn rewards for your credit card spending, consider a general cash-back card. Typically, these credit cards give you a percentage of your total spending back in cash without having to calculate exchange rates or redemption values.

One to consider: the Fidelity® Rewards Visa Signature® Credit Card, which can earn you unlimited 2% cash back on everyday spending.⁵ That cash back can be deposited into any eligible Fidelity account,⁶ giving your money more chances to grow.