We talk about credit cards all the time here at Thrifty Traveler because travel rewards cards are an integral part of seeing more of the world for less. But that doesn’t mean it’s not serious business.
On the contrary, opening up a new credit card – and getting a new line of credit – is one of the most consequential things you can do as a consumer. It requires serious thought and judgment, and should never be done on a whim. Whether you’re applying for your first card or your 20th, here are five questions you should ask yourself.
Will I Get Approved?
The first question can be the most difficult to answer and could require some legwork. Every time you apply for a new credit card, your credit score will take a small hit as the bank pulls your credit to judge whether or not you’re worthy of the card. And it goes without saying you don’t want to take a hit to your credit score only to get denied.
Thrifty Tip: See Thrifty Traveler’s Guide to understanding your credit score.
Ensuring your application will be successful is all about making the right choice on your card, and the right choice for your credit. Premier cards like the Chase Sapphire Reserve generally require an excellent credit score, while other cards can be more lenient. So if you’re just establishing a credit history or just finished digging out of debt, a top-of-the-line card may not be the right fit.
Monitor your credit score to make sure you know where you stand. There are great free tools like Credit Karma that will help you do this. And research the different cards you may apply for to see the average credit range that will lead to approval. If you’re far below that range, you may be better off considering a different card altogether.
There’s one other factor that could lead to a denial on a Chase card: the 5/24 rule. If you’ve opened more than five or more cards in the last 24 months (from any bank, not just Chase), you won’t be approved. The rule applies to most Chase cards, but read the guide above for a full list.
Is Now the Right Time?
Like the stock market or the tide, credit card bonuses fluctuate over time. It’s important to strike at the best moment. For example, Barclays is currently offering 60,000 miles on the American Airlines Aviator Red Mastercard. At 60,000 miles, the offer matches the highest offers we have ever seen for this card.
Further, Citi is out with a best-ever offer on its ThankYou Premier card, offering a 60,000-point bonus after spending $4,000 in three months. Chase, meanwhile, is steadfast in offering 50,000-point bonuses for both the Chase Sapphire Preferred and Chase Sapphire Reserve cards. That means anytime is a good time to apply for those cards.
It can be difficult to track the dizzying array of credit card bonuses, best-ever promotions and so on. We’ll do the work for you. Follow us on Facebook and Twitter, subscribe to our daily newsletter, or bookmark our site to follow along.
Will This Card Earn the Right Miles?
Just because a card is offering a big bonus doesn’t mean you should go for it. It has to be the right fit. In general, our best advice when considering a card is to start with a travel goal, then apply for the card that will help you achieve it. Applying for a card and figuring out how to spend the points is a recipe for poor redemptions and disappointment.
If your goal is to fly to Europe, a Southwest co-branded credit card won’t do you any good. Planning some domestic trips out of your home airport and want to fly for nearly free? Make sure the co-branded credit card you pick up is for an airline that, you know, actually flies out of your airport.
Points and miles won’t do you any good unless you can use them. So don’t get captivated by a big points bonus. Make sure you can put it to use. It’s hard to go wrong with a flexible points currency card from a bank like Chase, Citi or American Express. The ability to transfer points to several different airline partners gives you some extra flexibility and all but assures you’ll be able to put them to good use.
And other cards like the Capital One Venture card have an even easier way to redeem for free travel. You can take the 50,000-mile welcome bonus after spending $3,000 in the first 3 months and use it straight toward $500 toward travel.
It gets even better with the Chase Sapphire Preferred, where every point is worth 1.25 cents when you use them to book flight deals directly. That means the card’s 60,000-point sign-up bonus is worth $750 in travel.
Can I Hit the Minimum Spend?
Airlines and banks draw you in with big mile bonuses. But they don’t come automatically. Every travel rewards card comes with a minimum spend requirement in order to unlock those miles. For most cards, these range somewhere between $2,000 and $5,000 in the first three months with the card.
It’s important to put this in perspective of your personal financial situation. Can you hit that requirement responsibly, with your normal or upcoming expenses? That should be your mindset as you approach credit cards. Never open a credit card if you can’t hit the minimum spend requirement. And don’t make purchases you can’t afford just to meet a spending requirement. That’s a recipe for digging yourself into a deep hole of debt.
Pay off your credit cards in full every month – or better yet, set your cards to auto-pay. The moment you pay $1 in interest is the moment your miles become less valuable.
Is This Card Worth the Annual Fee?
We’re big fans of some of the top travel rewards credit cards, even those that come with seemingly eye-popping annual fees. We’re talking $550 a year for the American Express Platinum card and $450 annually for the Chase Sapphire Reserve. But these cards aren’t right for everyone. Even cards with a more modest annual fee may not suit every traveler.
But no matter the cost, many cards with an annual fee come with perks that drastically outweigh that cost. We tell people to do the math for themselves and decide whether a card with an annual fee makes sense for them. Study your travel habits and the benefits of a card. If you only travel once per year and can’t travel more even with a big stash of miles, a card with a large annual fee probably doesn’t make sense.
Take the American Express Delta SkyMiles Gold card, for example. With free checked baggage for you and several companions, it would only take one round-trip with a bag for two people to cancel out the $95 annual fee. And remember that this card and many other entry-level cards waive that cost in the first year.
And while the unbeatable perks on a card like the American Express Platinum are nice, they may not suit everyone. If you don’t have Uber in your area or a chance to use it, the $200 in annual credits don’t mean much. Lounge access is an incredible perk but make sure the wide array of options fits your travel plans. If not, that $550 annual fee stings a lot more.
Credit cards can help unlock a new world of travel, but this is serious stuff. Do your homework and never apply for a credit card lightly. Make sure you understand what you are getting yourself into. If you can be responsible with your credit, you can unlock a world of free travel.
Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer.