Should You Cancel Your Travel Credit Cards During the Pandemic?
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Why are travel credit card perks going unused during the pandemic?
Here's your Money Briefing for Wednesday, June 24th. I'm J.R. Whelan for The Wall Street Journal. A lot of people have canceled or postponed their travel plans during the pandemic. So if you've got a credit card that offers travel-related perks, there's a good chance they're going unused. Credit card companies don't want you to cancel the card, so they're coming up with new offers for customers that are staying home.
Instead of offering a $300 travel credit where they wipe out $300 worth of travel purchases that you make to the card, they're wiping out grocery purchases because that's where people are spending their money now.
But is it worth racking up miles and points during the pandemic? Or would it be wise to switch away from a travel credit card? Our Middle Seed columnist Scott McCartney will have answers after the break.
For a lot of people during the pandemic, travel is on hold, and that means they aren't using the travel perks that are tied to certain credit cards. Middle Seat columnist Scott McCartney is here to discuss what credit card companies are doing about it. So Scott, not only have the credit card companies built a lot of their business on travel rewards, but consumers have booked lots of vacations. This is a tricky time for everybody.
Yeah, it really is.
How have issuers changed travel credits to cover groceries and streaming?
A lot of our credit cards are really geared towards giving us benefits at the airport and people aren't going to the airport. So if it's fancy airport lounges or baggage fees or early boarding or all those things that you use a credit card for, a particular credit card for, they're just of little value to you now. And so it's a good time to consider whether you ought to be getting other rewards that would be valuable.
So what are the credit card companies done to try to stay on consumers' radars and keep their credit cards relevant in their wallets when most of them aren't traveling?
Yeah, this has been really interesting. It's happened quickly. The credit card companies recognized they had a problem right away and did some meaningful things about it. Generally, this comes with the high-end cards, the cards that are $450, $550 a year. They have great benefits for travel, but obviously those benefits aren't working frequently. So they've offered benefits like big bonuses for grocery shopping, also video streaming services, cell phone plans, gas purchases, since you're not purchasing travel. And those can really significantly affect your balance. Some of them are even doing, instead of offering a $300 travel credit where they wipe out $300 worth of travel purchases that you make to the card, they're wiping out grocery purchases because that's where people are spending their money now.
And so you do get value. In fact, one of the bank rate and credit cards dot com did a survey and found that 81 percent of people with annual fee credit cards thought they were getting as much value or more value out of the credit card now than they were before the pandemic.
So how should people go about managing the buildup of their points and miles when they're not traveling?
Should you keep accumulating miles now or switch to cash-back cards?
It is a good time. If you do plan to travel in the future, it is a good time to accumulate points. Points are going to be very valuable to people when they want to get back to traveling, especially if airlines and hotels are offering big sales to lure people back when things open up. But if you're in the camp where I'm just not going to travel for a while, I think it's a good time to change out cards, maybe go to a cash back card for two years. When you do come back to travel, if you've been away from the card for the canceled the car been away for two years, you can get sign up bonuses when you come back. So it's that that sort of rotation of credit cards may make sense for some people, particularly the ones who have sort of the the co branded basic airline card or co branded basic hotel card.
With the airline card, you You know, American Airlines Advantage, all the airlines have it. You get a checked bag fee waiver. You get some early boarding.
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Chapters
6 chapters
1
Why are travel credit card perks going unused during the pandemic?
0:05–1:20
2
How have issuers changed travel credits to cover groceries and streaming?
1:20–3:15
3
Should you keep accumulating miles now or switch to cash-back cards?
3:15–4:22
4
How can rotating or downgrading cards preserve value without closing accounts?
4:22–5:24
5
What credit-score risks come with canceling or signing up for new cards?
5:24–6:15
6
When does it make sense to get an airline co-branded card for lifetime status?
6:15–6:43
Speakers
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