More Saving Equals More Trips With The Right Card
Travelling is a passion for many. But there are costs involved. There are many millennials who travel for one to two months a year, and their entire savings plan is aimed at garnering enough cash for the next trip.
This is where co-branded travel credit cards come in handy. Such cards allow customers to enjoy benefits while making transactions. There are reward points that can be redeemed for air miles, flight awards, access lounge, hotel stays, etc. But it is easy to get confused given the many options of travel cards from big banks such as SBI, HDFC, ICICI, IndusInd, Axis, and American Express. The cards are mainly co-branded with travel sites, travel companies and airline firms. With the holiday season round the corner, DNA Money talked to experts to decode the co-branded travel credit cards for you.
Why travel credit cards
Travel credit cards offer customers an opportunity to earn free points that are redeemable for airfares, hotels or cash backs. Choosing a good credit card for your travel needs has to do with your priorities.
“For instance, opt for a good air miles program, which gives you an option to redeem miles on leading airlines and hotels. Complimentary access to airport lounges and discounts at restaurants is also an attractive feature to watch out for,” said Gaurav Chopra, Founder and CEO, IndiaLends. The overall expense of your trip can be reduced considerably with these advantages.
But should everybody own a travel credit card? According to Mrin Agarwal, director, Finsafe one should opt for a co-branded airline card only if you travel a lot. Also stick to the same airline and not choose the airline based on the cheapest fare.
Customers of travel credit cards need to be clear about two things, said Manav Jeet, MD & CEO, Rubique. “The most important thing to understand is the purpose of opting a credit card and payment system acceptability for the credit card. Today, many banks have customised credit card offerings. Considering the payment system acceptability aspect, many merchants in India and across the globe prefer VISA and Master Card payment systems only,” he pointed out.
Factors guiding your choice
If you are not looking at only travel, but an overall card that also offers travel benefits, then you can consider a card that gives you immediate travel benefits like a complimentary air ticket code or a free stay at a hotel. Complimentary membership to a frequent flyer programme can also come in handy if you fly often, said Chopra.
That being said, one of the first things about choosing a card is ‘Welcome Bonus’. In the race to acquire maximum customers, most credit card providers are now offering welcome bonuses such as freebies and additional reward points. An important disclaimer here is that a lot of them have a condition attached to it, added Chopra. Like they might ask you to make spends of a certain amount, within a certain time, for you to avail the benefit.
Next, is the ‘annual fee’. This is the amount that you need to pay to just use the card. Ensure that you chalk out details of the benefits you are going to receive from the card, after you subtract the annual fee. The annual fee must be seen in the context of the offering. Sahil Arora, head of payment products, Paisabazaar.com said: “Opt for a card only if you spend a sizeable amount on a certain brand or service, and ensure it extends services to your preferred location.”
‘Reward value’ is very important. It is up to you how well you utilise those rewards. Make it a point to check the point to money (or the equivalent reward) ratio. If there are redemption offers available from a bunch of products, then check how many of those products would you see yourself getting.
Rewards are given by redeeming points, which are accumulated by transactions. Check if there any minimum spending criteria or other restriction on redeeming the points, said Agarwal of Finsafe.
The reward points that credit cards offer have an expiry date. Check the expiration period of the points that you will be earning by using a credit card. “Few credit cards have evergreen points which never expire. These can be great for you if you plan on using your card for a longer period, but not so frequently,” argued Chopra.
“You must also consider other parameters such as renewal fee, discounts, cash-backs, complimentary air tickets, travel vouchers and renewal benefits available on credit card,” added Arora.
Perks and penalties
It is also important to look into the additional perks being provided by the issuer like access to airport lounges, golf courses or excess baggage allowance, etc. “For example, one of the cards allows only four complimentary lounge visits, whereas another card provides unlimited access to lounges. Also, check if the access to lounges is limited to domestic lounges only or is it valid across the globe,” said Agarwal. If the consumer is using the card overseas, it is also important to check on the foreign transaction fees.
The card you pick should help you in your lifestyle, or help you get the lifestyle you aspire to. In order to get the best deals and make smart savings on your transactions, it’s important to know the features your credit card packs. Navin Chandani, chief business development officer, BankBazaar said: “Always take the time to go through details of your credit card’s features. This helps you in two ways. One – you will be aware of the rewards loaded on your card, and this will save you potentially a lot of money in the long run. Two – you will also be aware of the various charges and penalties associated with your card, and you will be aware of how to minimise them.”
There are simple ways to get the most out of your card. For example, avoid cash withdrawals since these attract an interest rate from the first day. Keep track of the expiry of your reward points. Try and keep your credit utilisation (percent of your spending limit utilised) at 20-30% for most months, since credit rating agencies such reward low utilisation with a high credit score. Lastly, always try and settle your card dues in full and on time every month, because credit card debt is the most expensive form of debt, said Chandani.
A little scrutiny on the payment terms and billing cycle can gain you significant savings, said Manav Jeet of Rubique. Assess your spending pattern & your salary cycle to arrive at the convenient billing date. “Never ignore the cost of late payment that can range upward of Rs 500 plus GST, depending upon the outstanding credit card dues. Non-payment of the minimum amount due on regular basis will result to high monthly interest rate upwards of 3% per month, which can negatively impact the bureau score, resulting into higher borrowing cost for any future loan requirements. Ideally, you should not hold more than two or three credit cards to maintain a good CIBIL score,” he said.
The presence of online financial marketplaces has further simplified the task of selecting the right credit card. You can visit such platforms to filter and choose a card that matches your eligibility, spending habits, and other requirements, said Arora of Paisabazaar. Before zeroing in on a particular card, carry out cost-benefit analysis as well. This would help to select card whose benefits significantly outweigh its costs.
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