How to Choose the Right Credit Card, Limit Travel Spending
After 2 years of Covid 19, many Indians are finally starting to travel again. However, high energy prices and general inflation have driven up the cost of travel the most. Choosing the right credit card can provide a cushion against those inflated prices. Travel cards are credit cards that offer higher benefits for travel. Travel benefits come in the form of air miles and reduced air fares, fuel surcharge discounts, airport lounge access, hotel discounts and bundled travel insurance. For frequent travelers, they offer an advantage over regular credit cards. Raj Khosla, Founder and MD MyMoneyMantra.com, said, “For example, if you spend via a regular credit card, you only earn around approximately ₹2,000 for travel expenses of ₹5,000,000. It depends from card to card and from bank to bank. However, you can earn approximately ₹22,500 in points for a normal travel credit card for travel expenses of ₹5,000,000. For example, with the Citibank Premier Miles card, you earn around 4.5% for spending on airlines and hotels.”
Benefits of travel cards: Travel cards generally offer a bunch of benefits to travelers.
Some of them are: Loyalty/cashback points: You get rewards points or cash back for every spend you make with a travel credit card. Sachin Vasudeva, Associate Director and Head of Credit Cards at Paisabazaar.com., said, “Most travel credit cards offer rewards points as a membership and renewal benefit. These benefits can help recover part or all of the membership and renewal fees. The benefit realized from these complimentary free tickets can sometimes exceed the cost of membership and renewal fees. It is therefore important to compare the monetary value of your travel credit card’s membership and renewal benefits and opt for the one that has the greatest potential to recover or exceed the cost of your cards.”
Access to Airline Lounges and Flight Miles: You get airline miles for spending with your travel card. Some cards also offer bonus airline miles at the time of card purchase. Adhil Shetty, CEO of BankBazaar.com, said, “You can convert airline miles into future travel purchases, including airfares, hotel accommodations, ground transportation, travel packages, etc The value of airline miles depends on your usage. Apart from that, travel credit cards also offer free visits to domestic and international airport lounges.
Low forex markup fees: Foreign markup fees are usually charged to your travel credit cards when you buy things overseas. There are travel cards that charge markup fees as high as 3.5% and on the other hand, cards that charge markup fees as low as 2% or 1.99%. For example, SBI Card ELITE charges 1.99% and HDFC Regalia Credit Card charges a surcharge of 2%. On the other hand, Axis Vistara Signature credit card and Air India SBI Signature credit cards charge 3.5% surcharge fee.
Bundled travel insurance: Travel credit cards offer comprehensive insurance coverage to protect you against unexpected expenses that may arise from plane crashes, health-related emergencies, passports, lost luggage, and more. For example, the Axis Vistara Signature credit card and the Citi PremierMiles credit card can provide you with air accident coverage for up to ₹2.5 crores and ₹1 crore, respectively.
Ways to get the most out of a travel card
Free cards are less generous in terms of loyalty points: When you opt for a travel credit card, the goal is to accumulate airline miles from your eligible expenses so that they pay for the tickets. Therefore, the more you spend through a travel card, the more you get.
Shetty said: “You can be sure that any premium card will reimburse you for more than the annual fee, provided you use it correctly. Fees start from ₹499 and could reach tens of thousands. The more premium the card, the higher its fees and the value of its benefits. These premium benefits will not be available on a regular credit card or free card. Free cards will also be geared towards basic benefits such as fuel surcharge or a small number of lounge entries. Of course, without the card, you miss all those benefits.”
Opt for the co-branded card if you like the airline: “Broadly, you can divide travel cards into co-branded cards with airlines and generic travel cards. The latter will earn you extra points on travel over other expenses, but the travel is not tied to a particular airline. If you like an airline, its co-branded card is a better choice for you than a generic travel card,” said Ajay Awtaney, editor of LiveFromALounge.com, a digital platform focused on Indian credit cards. . “The risk of reward points losing their value if the airline stops operating is there. Take the case of Jet Airways. Issuing rewards points was outsourced to a separate company, and as the points continued to come out, they lost a lot of value. For example, in 2011, 180,000 points would get me a Mumbai-New York return ticket. Now you would need something like 6 lakh points for that,” Awtaney said.
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