4 Signs You Should Dump Your Travel Credit Cards
So far on this blog, I've been singing praises of using travel reward credit cards to save money on flights, hotels and other travel expenditures.
However, banks and credit card companies aren't out to subsidize your travel. They're out to make money on high outstanding balances and late payments. In light of recent news that banks are looking to cut back on credit card rewards, you should be mindful about signing up and keeping credit cards.
Here are five signs you should get rid of your travel rewards credit cards ASAP.
1. The annual fee outweighs the benefits
While many travel rewards credit cards waive the annual fee for the first year (looking at you RBC Avion and BMO World Elite), keep in mind that most of these cards will require an annual spend of $10,000+ to justify the annual fee. I say this because you could get a no-fee card and probably get around 1.25% cash back one way or another.
Let's use an example. The Scotiabank Passport Visa Infinite has an annual fee of $139. Among its major benefits are no foreign transaction fees, Priority Pass membership and 6 lounge passes per year.
If you're primarily looking for no foreign transaction fees and don't care about lounges, you are better off with a card that doesn't charge an annual fee, such as Rogers World Elite, Brim, Home Trust, or STACK.
Although this card has a lot of other benefits, they are much harder to quantify for the average person (travel insurance, purchase protection, etc.).
There is a $50 cash back offer from GCR for first-time customers which partially offsets the annual fee, but you're still paying $89 for the first year.
Another benefit for first-time customers is that there is a $250 travel credit that can be applied towards most travel expenses, such as flights, hotels, tours and the like. Unless you're planning to travel in the first year of holding the card, it may not mean much to you.
I would recommend getting this card if you really like airport lounges, as it not only comes with membership but also reduces the cost to $139/6 = $23.17 per visit. Lately I've been on a lot of flights which coincide with meal times, and I find that $23.17 isn't far off from the cost of a meal at an airport restaurant anyway, whereas I can get unlimited food and drink at a lounge.
If you plan on traveling but can't earn in the categories that the credit card rewards you for, then you should dump that card.
Let's use another example. The American Express Cobalt Card ($50 cash back via GCR) has a monthly fee of $10, which is essentially an annual fee of $120. The card earns rewards as follows:
Now compare this to the Tangerine Money-Back Credit Card, which can also give you 2% cash back on two of: groceries, restaurants, gas, hotel, and a few other categories that the Cobalt doesn't have above.
From a pure cash back perspective, you would need to be able to spend at least $333.33/month on groceries, restaurants and drinks to match the cash back offered by Tangerine:
5% cash back * $333.33 = $16.67
$16.67 - $10.00 monthly fee = $6.67
$6.67/$333.33 = 2%
If your lifestyle involves spending above $333.33/month at restaurants that take Amex, this could be a VERY lucrative option for earning points!
If you don't eat out often or don't go to places that take Amex, you're probably better off with the Tangerine MasterCard.
From a travel rewards perspective, you will need to have a redemption in mind (either a flight or hotel) in order exceed 2% "return on points". If you're not interested in any travel rewards programs, then this card probably isn't for you either.
This requires a lot of record-keeping, tracking and generally being very, very organized. You are often dealing with different statement cycles, payment due dates and passwords.
If you feel overwhelmed by the amount of cards you have - even if you only have two - then you should dump at least one of them. Travel rewards credit cards are meant to increase the fun in your life, not cause stress.
A recent example of this is the SPG Amex. With the Marriott and SPG merger, there were several changes to the Marriott and SPG cards. For one, the Marriott Premier Chase Visa (RIP) got discontinued in Canada, and the SPG Amex changed the earning rate for regular purchases from 3 Marriott points per $1 to 2 Marriott points per $1, while increasing the earning rate on Marriott-related purchases from 3 Marriott points per $1 to 5 Marriott points per $1.
While there are other benefits to the SPG Amex, such as the annual free night certificate worth 35,000 Marriott points, people who used the SPG Amex primarily to convert the points to frequent flyer programs saw their earning potential decreased by 1/3. Unless you value hotels or are charging at least five figures to this card on an annual basis, it likely isn't worth the $120 annual fee.
Let's use an example. The Scotiabank Passport Visa Infinite has an annual fee of $139. Among its major benefits are no foreign transaction fees, Priority Pass membership and 6 lounge passes per year.
If you're primarily looking for no foreign transaction fees and don't care about lounges, you are better off with a card that doesn't charge an annual fee, such as Rogers World Elite, Brim, Home Trust, or STACK.
Although this card has a lot of other benefits, they are much harder to quantify for the average person (travel insurance, purchase protection, etc.).
There is a $50 cash back offer from GCR for first-time customers which partially offsets the annual fee, but you're still paying $89 for the first year.
Another benefit for first-time customers is that there is a $250 travel credit that can be applied towards most travel expenses, such as flights, hotels, tours and the like. Unless you're planning to travel in the first year of holding the card, it may not mean much to you.
I would recommend getting this card if you really like airport lounges, as it not only comes with membership but also reduces the cost to $139/6 = $23.17 per visit. Lately I've been on a lot of flights which coincide with meal times, and I find that $23.17 isn't far off from the cost of a meal at an airport restaurant anyway, whereas I can get unlimited food and drink at a lounge.
2. The rewards don't match your lifestyle
If you don't plan on traveling, you probably shouldn't sign up for a travel rewards credit card.If you plan on traveling but can't earn in the categories that the credit card rewards you for, then you should dump that card.
Let's use another example. The American Express Cobalt Card ($50 cash back via GCR) has a monthly fee of $10, which is essentially an annual fee of $120. The card earns rewards as follows:
- 5 MR-Select points per $1 spent on groceries, restaurants and drinks
- 2 MR-Select points per $1 spent on travel and gas
- 1 MR-Select point per $1 spent on everything else
Now compare this to the Tangerine Money-Back Credit Card, which can also give you 2% cash back on two of: groceries, restaurants, gas, hotel, and a few other categories that the Cobalt doesn't have above.
From a pure cash back perspective, you would need to be able to spend at least $333.33/month on groceries, restaurants and drinks to match the cash back offered by Tangerine:
5% cash back * $333.33 = $16.67
$16.67 - $10.00 monthly fee = $6.67
$6.67/$333.33 = 2%
If your lifestyle involves spending above $333.33/month at restaurants that take Amex, this could be a VERY lucrative option for earning points!
If you don't eat out often or don't go to places that take Amex, you're probably better off with the Tangerine MasterCard.
From a travel rewards perspective, you will need to have a redemption in mind (either a flight or hotel) in order exceed 2% "return on points". If you're not interested in any travel rewards programs, then this card probably isn't for you either.
3. You're finding it hard to keep track of all your credit cards
While I do have a post on how to earn travel rewards using a maximum of two credit cards, many people such as myself hold way more than two credit cards at a time.This requires a lot of record-keeping, tracking and generally being very, very organized. You are often dealing with different statement cycles, payment due dates and passwords.
If you feel overwhelmed by the amount of cards you have - even if you only have two - then you should dump at least one of them. Travel rewards credit cards are meant to increase the fun in your life, not cause stress.
4. The credit card changes its reward earning potential
Excluding promotions for first time customers, I'm referring to the rare instances where credit card rewards end up becoming less valuable over time.A recent example of this is the SPG Amex. With the Marriott and SPG merger, there were several changes to the Marriott and SPG cards. For one, the Marriott Premier Chase Visa (RIP) got discontinued in Canada, and the SPG Amex changed the earning rate for regular purchases from 3 Marriott points per $1 to 2 Marriott points per $1, while increasing the earning rate on Marriott-related purchases from 3 Marriott points per $1 to 5 Marriott points per $1.
While there are other benefits to the SPG Amex, such as the annual free night certificate worth 35,000 Marriott points, people who used the SPG Amex primarily to convert the points to frequent flyer programs saw their earning potential decreased by 1/3. Unless you value hotels or are charging at least five figures to this card on an annual basis, it likely isn't worth the $120 annual fee.
Comments
Post a Comment