Mumbai: Travel is fun. And the right tools can make travel even more fun. Have you considered opting for a travel credit card? “The first thing that people associate with travel cards are air miles. However, travel cards also come with other features,” said Navin Chandani, chief business development officer, Bankbazaar. To know more, read on.
What are travel cards?
A travel card is a type of credit card that is specifically designed keeping in mind the needs of a traveller. A normal credit card gives you rewards in form of cashback or points which can be redeemed for gift cards, merchandise and discounts. A travel credit card offers travel-specific benefits. “Travel credit cards are available in both, co-branded and non-cobranded varieties. As co-branded travel credit cards usually offer higher reward points on spends made at partner travel brands, consider opting for a co-branded travel card only if you are loyal to a particular travel brand,” said Naveen Kukreja, chief executive officer (CEO) and co-founder, paisabazaar.com.
The non co-branded travel credit cards offer higher benefits on travel expenses and greater choice for earning reward points or redeeming them as you are not limited by partner airlines or hotels, he added. These cards offer points or miles that can be redeemed for travel reservations or travel-related options. Reward points or miles can be earned as a sign-up bonus, usually after meeting a minimum amount of spending within specified time. Also, reward points or miles can be earned for spends as well as purchases from the airline or hotel partner or for purchases from certain categories of merchants.
How to choose a card?
The easiest way to choose a card is to approach your existing bank. However, this might not always be the best option for you. To make the right decision, first consider your travel habits. Check the joining fee and the annual fee.
“Unless you are opting for a no-frills card, cards typically include a joining and an annual fee. In case of co-branded or specialised cards, this is usually a sizeable amount. Make sure the cost of the card will be recovered before you opt for it. If you spend enough, the rewards you earn make the annual fees well worthwhile, not otherwise,” said Chandani.
This means before choosing a travel card, consider the amount of spending a card requires so that you can earn the extra bonus points and the time frame in which you must do it. If it is more than you usually spend or more than what you can reasonably pay back without carrying a balance, it is advisable not to opt for it, he said. You should also know the foreign currency mark-up fee, foreign transaction fee and cash withdrawal charges when you use your credit card abroad. A foreign transaction charge is between 1.5% and 3.5% of the total transaction.
Cash withdrawals can also cost you anywhere between 1% and 4%, in addition to the standard cash withdrawal rate for your credit card.
“It makes sense to carry cash or a travel card where charges are muted compared to your card. Or else, choose a no foreign transaction fee travel card or a card that rewards you heavily for foreign transactions so that the transaction fee can nullify when redeeming those rewards,” he said.
What you should do
There’s no doubt that travel credit cards offer a number of benefits. But before you apply for one, it makes sense to assess your travel needs. If you are not a frequent traveller or are not excited about travel rewards, don’t go for one.
Secondly, consider the cost of the travel credit cards, they come with significant joining and transaction fees. Always do the cost benefit analysis before applying for one. If you tend to not repay your card spends on time, avoid a travel credit card. Instead, switch to a no-fee credit card, use it wisely, and once you are responsible with credit, switch to a travel credit card.
Lastly, remember that gone are the days when credit cards were used as a means of credit. Credit cards are not to be used as means of credit, rather to get convenience and benefits. And that can only happen if you pay your total due on time and don’t carry forward the balance.