Today I'd like to take a closer look at the value proposition offered by some of the cards discussed in Chapter 2 of my book: fixed-value travel rewards cards. When looking at any card, you should ask three questions: is it worth signing up for; is it worth making purchases with; and is it worth renewing when the annual fee is due?
The first question is easy to answer: since the annual fee is waived for all these cards, you can apply for any of them when the signup bonus is high enough to justify the hard credit inquiry, and you aren't applying for any other cards from the same issuer in your current application cycle.
Here are the current signup bonuses available for these cards:
- Capital One Venture Rewards. 10,000 Venture miles after $1,000 in spending within 3 months. Earn 2 points per dollar, redeem them at 1 cent each for statement credits against travel purchases made with the card. No partial redemptions (you must have enough points to pay for the entire travel purchase). $59 annual fee, waived the first year.
- US Bank Flexperks Travel Rewards Visa Signature. 17,500 FlexPoints after $2,500 in purchases within the first 5 months. Earn 1 point per dollar, 2 points on airfare, groceries, or communications expenses, 3 points per dollar for transactions coded as charity. Redeem points for travel redemptions using the Flexperks travel booking tool at up to 2 cents per point, in defined tiers. No partial redemptions. $49 annual fee, waived the first year.
- Citi ThankYou Premier. 25,000 ThankYou points after spending $2,000 in the first 3 months. Earn 1 point per dollar, 1.2 points at supermarkets, gas stations, commuter transportation and parking. Redeem points at 1.33 cents each for travel purchases using the ThankYou Rewards booking tool, with partial redemptions allowed. $125 annual fee, waived the first year.
- BarclayCard Arrival World Mastercard . 40,000 points after $1,000 in spending within 90 days. Earn 2 points per dollar spent on the card. Redeem points for statement credits against travel purchases made on the card at 1 cent per point, and receive a 10% rebate after each redemption. No partial redemptions. $89 annual fee, waived the first year.
- Priceline Rewards Visa Signature. 5,000 points after first purchase. Earn 2 points per dollar spent on the card, and 5 points per dollar spent on Name Your Own Price reservations. Redeem points at 1 cent each for statement credits against purchases made on the card, with no partial redemptions.
As you can see, the Priceline Rewards card has a signup bonus worth $50, the Venture Rewards card's signup bonus is worth about $100, the Flexperks card $260-$350, ThankYou Premier $332, and Arrival World $444. In general, it's never worth signing up for the Venture Rewards card except during the periodic promotion when they offer a signup bonus of twice the number of miles you earned on a competing card during the previous calendar year, which can be quite lucrative.
All these cards, except the Venture Rewards and Priceline cards, are worth applying for and spending enough on to earn the signup bonus. But are any of them worth making purchases on after you've spent enough to trigger the signup bonus? The answer is usually no, since the Fidelity Investment Rewards American Express card offers 2% cash back on all purchases and the Fidelity Visa Signature card offers 1.5% cash back on the first $15,000 in spending each calendar year, and 2% thereafter, while also having no annual fee. The chart below illustrates the value proposition offered by spending on each of these cards:
This chart makes clear that the standout value among these cards is the US Bank Flexperks Travel card, which offers up to 6% back on charitable spending (which earns 3 Flexpoints per dollar), but also up to 4% back on airfare, gas, or groceries (whichever you spend most on each billing cycle), plus telecommunications expenses, when you redeem your points using the Flexperks booking tool.
This brings us to the most fundamental difference between these cards: the method of redemption. As you saw above, fixed-value rewards points are divided into two groups: those that require you to make prospective bookings using your points through their travel tools (ThankYou, Flexperks) and those that allow you to redeem your points for a statement credit against a purchase you've already made with the card.
When you have a choice, you should redeem for statement credits against paid hotel stays, and use rewards booking tools for airline reservations. This is for the simple reason that unlike airline frequent flyer programs, hotel loyalty programs generally only award points for paid reservations made through the hotel's own website. By booking a paid hotel reservation through the hotel's website, then redeeming your points for a statement credit against the cost of that reservation, you'll earn hotel loyalty points for your reservation, while you won't do so when you make a hotel reservation through a loyalty program's award booking tool. This increases the value of your fixed-value points by allowing you to double-dip.
For everyday purchases, only the US Bank Flexperks Travel card can compete with the Fidelity Rewards 1.5% (Visa) and 2% (American Express) cash back cards. However, several of the other cards discussed here can offer great value when you take advantage of their lucrative signup bonuses. Just don't be suckered into paying an annual fee for a card that isn't worth keeping!