The Credit Card Travel Trap
Those credit card reward points aren’t all they’re promised to be.
Do you have a credit card because you want to travel for free? Odds are it’s not working out for you – and you probably don’t even know it.
Credit card companies lure new customers with promises of free air travel for racking up a lot of points (which of course, means spending a lot). However, a new study by financial site NerdWallet concludes, “83 percent of consumers apply for credit cards at the wrong time, forfeiting an average of 15,338 miles or points.”
How does this happen? Simple: The rules are confusing.
Once or twice a year, credit card companies tout “limited-time sign-up bonuses.” You might earn 5,000 to 50,000 extra points just for signing up for a card during a particular couple of weeks.
While that sounds straightforward, the problem comes when you try to reimburse those points. NerdWallet says you need to have a card for at least five months to get the most out of those convoluted rewards, which often come with restrictions and expiration dates. However, many people don’t want to wait years to travel, or they don’t want to travel, say, during the dead of winter.
“Consumers miss out on an average of $177 worth of rewards when they apply for travel cards at the wrong time. But waiting for the right time has a cost, too,” NerdWallet says. “Consumers should apply for a travel card at least five months before they intend to travel to take advantage of the sign-up bonus.”
Of course, all the reward points in the world mean nothing if you carry big balances and pay steep interest rates. That’s why Consolidated Credit President Gary Herman suggests avoiding the “rewards trap” all together.
“The simplest fact is this: Credit card companies know you’ll pay them more in interest rates than they’ll pay you in points,” he says. “If your finances aren’t stable enough that you can pay off your credit cards each month, the last thing you need to think about are points.”
NerdWallet calculates, “The average travel point or mile is worth around 1.16 cents.” Yet the average interest rate on carrying a balance is just over 15 percent.
“If you do the math, you realize that carrying even a couple hundred dollars from month to month wipes out all the points you saved,” Herman says.
If you want to really rack up those travel points, call Consolidated Credit first at . A certified credit counselor will give you a free debt analysis. If you have big credit card bills, you might qualify for a program that reduces your payments by 30 to 50 percent. Before you know it, you’ll be able to travel in style.