Personal Finance

Initial Travel Credit Card Reward Promotions On the Rise

To some, credit cards just mean high-interest rates and tons of debt. However, to others, credit cards are useful tools for earning rewards and racking up travel points. As those in the latter camp likely know, one of the big ways to score with a rewards credit card is to take advantage of the initial spending bonuses many cards advertise. In fact, as a new study by MagnifyMoney has found, the size of these offers is growing significantly.

For their study, MagnifyMoney looked specifically at travel rewards credit cards and the number of miles they offered as a sign-up bonus. While they discovered that the value of these offers had nearly tripled over the past decade, it also determined that the average annual fee for such cards had risen as well.

According to the report, the average initial spending bonus was 16,050 points. That more than doubled by 2013 as the average hit 34,327 points. However, for 2018, the average now sits at a whopping 40,556 points. That figure goes even higher among hotel-branded cards, with that average climbing to 60,000 (versus 21,250 in 2008). Meanwhile “cash for travel” cards have seen the biggest lift overall, climbing from 10,000 points in 2008 to 30,455 today, marking a 3x gain.

One of the big reasons for this trend is that the market for travel credit cards has become increasingly competitive. As Brian Karimzad of LendingTree explains, “More and more cards are offering travel rewards without being tied to one airline. We wanted to see what that competition has done to intro bonuses.” Unfortunately, while issuers are raising their offers to lure customers, they also appear to be hiking their fees.

In 2008 the average annual fee for a travel rewards credit card was $74. According to MagnifyMoney’s latest study, that average now sits at $120. Although that’s not great news, it is worth noting that the 66% increase is dwarfed by the 250%+ gains the initial bonuses have experienced. Then again it’s hard to say whether these points have kept their same value. Moreover different cards may have different redemption rates.

Despite some of the inherent flaws in this latest study, the trend of increasing bonus offers for travel credit cards is true. That said it’s important for potential applicants to carefully research their options and things like redemption rates that can prevent them from making true apples to apples comparisons. Of course would-be cardholders should also consider that, even after the initial bonus is gone, the annual fees for such cards will continue. Therefore be sure to evaluate the value of any given credit card and ensure that you’ll still come out ahead.

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