Is Cash Back King? (How Travel Cards Are Getting Worse)

Summary

In this video, the creator explores the shifting dynamics between cashback and travel credit cards, emphasizing how recent changes in the credit card world might make cashback cards more appealing. Key issues discussed include rising annual fees, devalued perks, and complicated rewards systems in travel cards, while cashback cards offer simplicity, instant rewards, and higher potential returns. Despite these challenges, travel cards still shine with lucrative signup bonuses. The creator advocates for a hybrid approach, combining the best of both worlds for maximum value, and shares personal strategies to navigate the evolving credit card landscape.

Takeaways

• 😀 Travel credit cards used to be the go-to choice, but their value has been diminishing due to rising annual fees and decreasing perks.
• 😀 Recent increases in annual fees, such as with United, Delta, and Hilton, make it harder to justify the expense of travel credit cards.
• 😀 Perks like rental car credits and private jet credits are becoming more restrictive and less valuable, making it harder for cardholders to get the most out of their cards.
• 😀 Point devaluations are becoming more frequent, with airlines like Delta and United and hotel chains like Marriott decreasing the value of their points.
• 😀 Travel portals are being pushed more heavily by card issuers, leading to a loss of loyalty benefits and customer service issues when booking directly.
• 😀 Lounge overcrowding is now the norm, and access to quality lounges is increasingly difficult, reducing the value of this perk.
• 😀 Cashback cards are gaining popularity due to their simplicity, with fewer restrictions and easier management compared to travel credit cards.
• 😀 Cashback cards, such as those from Bank of America and Fidelity, are offering competitive returns and making cashback rewards more accessible.
• 😀 The instant gratification of cashback cards allows immediate redemption, providing real-time value unlike travel points, which can be subject to devaluations.
• 😀 Managing cashback cards is simpler, with fewer cards needed for a strong rewards setup, while travel card portfolios can become unwieldy with multiple cards to manage.
• 😀 Travel credit cards still offer valuable signup bonuses, which can sometimes be worth thousands of dollars in value if used wisely, making them attractive for those willing to put in the effort.

Q & A

Why have travel credit cards become less valuable recently?

Travel credit cards have become less valuable due to rising annual fees, declining perks, point devaluations, and restrictions on the use of travel-related credits. Many travel benefits are harder to redeem, and the overall value of the cards is diminishing.

How have annual fees on travel credit cards changed recently?

Annual fees on travel credit cards have been rising significantly. For instance, cards like those from United, Delta, and Hilton have all seen substantial hikes in their fees, making them more expensive to maintain.

What are some of the issues with travel credits on cards like the United Quest card?

Travel credits on cards like the United Quest card are often difficult to use. For example, certain credits, like the Avis and Budget rental car credit, require multiple purchases and are issued in the form of United Travel Bank cash, which is less immediate than a statement credit.

How has the value of airline miles changed recently?

The value of airline miles has decreased due to devaluations in rewards programs. For instance, Delta devalued their SkyMiles in 2023, and United’s dynamic pricing makes it harder to find valuable award flights. Additionally, Southwest reduced the value of their points from 1.5 cents per point to around 1.2 to 1.3 cents.

What impact has the rise of travel portals had on travel credit cards?

Travel portals have pushed users to book through them for better redemption rates. This can force customers to sacrifice loyalty benefits, like hotel status or perks, and complicate changes to bookings. Booking through portals can also lead to higher redemption rates for hotel stays and flights.

Why is lounge overcrowding becoming a problem for premium travel cardholders?

Lounge overcrowding has become a significant issue because premium travel cardholders now have access to the same lounges, leading to a decrease in lounge quality and availability. With more people using lounges, it’s harder to find a quiet, comfortable spot.

What are the advantages of cashback cards compared to travel cards?

Cashback cards are simpler, more straightforward, and provide instant gratification. You can use the cash back immediately for statement credits or other purchases, unlike travel points, which can be devalued or harder to redeem. Cashback cards also tend to have lower annual fees and less complex management.

How have cashback card offerings improved in recent years?

Cashback card offerings have improved as new players enter the market and existing ones offer better rewards. For example, the Bank of America Preferred Rewards program offers up to 5.25% cash back on certain categories. Additionally, cards like the Fidelity 2% Signature Visa have become stronger with added benefits.

What makes cashback cards easier to manage than travel credit cards?

Cashback cards are easier to manage because they require less tracking of spending categories and point values. You simply earn cash back and can redeem it immediately without worrying about point devaluations or complex reward systems. This makes managing a cashback wallet much simpler than a travel card wallet, which often requires multiple cards and careful tracking.

What role do signup bonuses play in the value of travel credit cards?

Signup bonuses remain a significant draw for travel credit cards, often offering 100,000 points or more, which can translate to thousands of dollars in travel value. These bonuses can outweigh the drawbacks of rising fees and diminishing perks if used strategically, such as through break-even analysis or downgrading to $0 fee cards after the bonus is earned.