Credit Card Reward Redemption Overview: Part One {Travel Category Erasers}

If you're new to the credit card points game, some of the first things you'll need to understand are the varying types of reward redemptions available. "Reward redemption type" simply refers to the method by which you are able to cash out for travel-related purchases. This varies greatly by brand and card type, and it can affect when and how you travel. This series will focus on the basic differences between them so you can determine which cards fit your goals and spending style.

Travel Category "Erasers"

With these types of cards {like the Barclay Arrival Plus and the Capital One Venture} any spending you make that falls under travel-related categories can be erased right from your statement. Travel-related charges include things like flights, hotels, cruises, car rentals, and other transportation methods like trains and buses.

This means that if you book a $300 flight and have enough points to do so, you can "delete" the charge directly from your statement without it affecting your available balance. It's just gone!

These types of cards are probably my favorite because they offer so much flexibility. If I see a really great hotel deal on Expedia, I can book it and erase the charge. No need to worry about converting the hotel's brand-specific points to cover the stay. This type of card is especially alluring when you consider that if you are able to charge things like movies and food to your hotel room, it all shows up in one price on your final bill. So on your credit card statement, you will just have a total amount for all incidentals and be able to erase the whole thing!

*Mind blown*

So what happens if you pay for a hotel and flight package that costs $1200 but you only have $450 worth of points? Can you cover part of the cost? Absolutely! This varies from card to card, but the process is essentially the same.

Barclaycard recently just raised its minimum redemption threshold to 10,000 points, or $100 {although it used to be $25, which gave you more flexibility}. So you could reduce that $1200 charge in any $100 increment between $100-$400. Something to bear in mind is that once you credit a charge, you can't reduce it any further. If you decide to only put $200 toward your $1200 vacation, you can't go back later and take away more money from it. Additionally, Barclaycard will give you 5% back in the points you redeem. So if you redeem 20,000 points {$200} on a purchase, you will get back 1,000 points {equivalent to $10}.

The portal for doing all of this is very simple and easy to use. The charge shows up in your available travel redemption portal, you select the number of miles you want to redeem, and you're done! This is a log of everything we've redeemed so far on this card:

The other card we've used is the Capital One Venture which works very similarly. Let's return to the fictitious $1200 vacation package we've booked. On the Venture card, you have the same $450 to spend. This time, however, you can use the entire $450 {or 45,000 miles} at once because the Venture card does not have a minimum redemption threshold. As a matter of fact, we have redeemed a train ticket for as little as $4.79! (UPDATE: It appears that appears that perhaps Capital One has changed the minimum redemption to 2,500 miles or $25. I have not been able to confirm this yet, but be aware.)

The redemption process is identical to the Barclaycard--very user friendly and easy to use. The redemptions do show up a little differently on your statement, but are immediately erased:

So, how do you earn these points? Each card will have a specific spending threshold that you need to meet in order to get the bonus points/miles. For example, in order to earn the 40,000 points bonus from the Venture card, you need to spend at least $3000 from account opening. {We'll talk about ways you can meet that requirement later.} Once you do, you'll see that bump in points. Additionally, you still earn two points per dollar you spend on the card. This means that if you spend only exactly the required $3000, you'll earn 6,000 miles, bringing your total earned points to 46,000!

Another, less lucrative, option is to redeem your points for cash. But you will only receive half of the points' value if you use this redemption. Spending 30,000 Barclaycard miles will get you $300 in travel, but only $150 if you choose to erase other expenses on your statement.

There are a few major things you should keep in mind. The credit card companies are not responsible for how vendors decide to categorize themselves. So you may run into a situation where you feel a purchase was travel related, but it charged to your card under a food or entertainment industry. Always be cautious and if there is a question, you can always call your card issuer to double check before you make the purchase.

You also need to be aware of annual fees. Both of these specific cards do carry an annual fee. Currently, the Barclaycard is $89 and the Venture is $59. They are both waived the first year. So this means that you can rack up the minimum spend, use the points, and then ditch the card before your anniversary date comes around and the annual fee is due. In some special cases, you may want to hang on to a card for more than a year and pay that fee. We'll discuss that as we get into brand-specific cards.

Always, always read the fine print of credit card offers! Make sure you understand the ins and outs, the minimum spending requirements, the posting details {a lot of cards don't post available miles until after your next statement closes}.

Both of these cards do require excellent credit. How cards can affect your credit score is a topic I will attempt to tackle in another post. But please, please be aware that your credit is an asset and is not worth damaging over a few hundred dollars' worth of travel miles. Don't ever jump on a card offer unless you are confident that you can handle it responsibly!

Catch Part Two here.

#basics