M is for Money

I’ve been a fan of rewards credit cards for years. I started first with a straight cash back card, then earlier this year I added the Subaru mastercard to our wallets. That card pays you 3% on all purchases, but it comes in the form of Subaru dollars. Already we’ve collected $400 in Subie bucks, which will be used to install a new clutch in the coming weeks. Now I’ve decided it is time to add a new type of rewards card to our wallets, a travel rewards card.

The next year of our lives will be expensive with some major home repairs and a wedding to pay for. Hopefully the wedding will be followed by a relaxing honeymoon. My goal is to use our major expenses to help fund the honeymoon by using a travel rewards credit card to pay for the purchases. But which card to choose?

Travel rewards cards come in many forms, the most common being airline or hotel rewards cards. These cards turn your spending into points or miles that can be redeemed for free flights or free hotel stays. Most have some type of annual fee, generally waived for the first year, and bonuses for the first time you use the card. Weighing the benefits of one program versus another can get complicated, the rules for how you accumulate rewards and the redemption policies vary greatly between different cards.

Airline versus Hotel Rewards

The first decision to make is what type of card will benefit you the most. If you hate flying and only do road trips, well then an airline card would be useless to you. Conversely, if your regular travel is to stay with friends or relatives, you don’t need hotel rewards. For our situation, I first looked at where we would like to honeymoon.

While we don’t have a specific destination picked, we are leaning towards an international trip. The rewards needed for a free international round trip airline ticket are high, probably higher than we could achieve in the next year. On the other hand, wherever we go we will need a place to stay. I decided that hotel rewards made the most sense for our situation, from there I had to decide which card to choose.

Starwood Preferred Guest Card

The Starwood Preferred Guest (SPG) card from American express is one of the most popular hotel rewards cards. There are also cards offered by Hilton or more general travel rewards cards like the ones offered by Orbitz and Capital One which can be used for hotel stays. I chose the Starwood card for several reasons – first, we don’t have an American express card, which is the only card accepted at Costco. Second, there are no blackout dates for rewards. Finally, they have hotels in most major cities around the world, so wherever we decide to go we will be able to use our rewards.

There are currently two promotions for new card holders, you get 10,000 points the first time you use the card and 15,000 bonus points if you spend $15,000 in the 1st six months. With our planned car repairs, home repairs, Christmas spending and wedding preparations, I think we can get that second bonus. Including the one point for each dollar spent, we would have 40,000 points within 6 months, good for 3-6 nights depending on the hotel we choose.

Travel rewards cards aren’t the right choice for everyone. In most cases I prefer the flexibility of a straight cash rewards system. I choose the SPG card because we are currently planning to travel and will spend enough to take advantage of the bonus offers. I compared room rates from hotels.com versus the number of points it would take to book the same room. Those 40,000 points are worth around $700, a return of 1.75% for current customers or 4.66% if those points came courtesy of the new cardholder bonus. Not a bad return for money we already plan to spend.