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- Rewards cards from the Chase Sapphire Reserve® to the Capital One® Venture® Rewards Credit Card have rolled out new ways to earn and redeem rewards in quarantine.
- While these new benefits could make it worth holding on to your travel credit cards, experts Benét Wilson and Sara Rathner recommend evaluating whether they’re still worth it for you.
- Even if you like using rewards to travel, adding a cash-back credit card to your strategy could be a smart move — and with cards like the Citi® Double Cash Card and Chase Freedom Unlimited®, you can avoid an annual fee.
- Whatever changes you decide to make to the credit cards in your wallet, it’s important to keep tabs on your credit report to make sure there are no errors.
- See Business Insider’s list of the best cash-back credit cards »
In “normal” times, spending $95 or more a year for a credit card that earns you points or miles toward a vacation can feel like a no-brainer if you love to travel. But, as we all know, “normal” looks a lot different in the middle of a worldwide pandemic. Most of us are staying close to home, and it can be harder to maximize cards that previously provided great value.
So, does that mean it’s time to ditch your travel rewards cards? Not necessarily — but you should take a few steps to make sure your credit cards are working for you.
Now is the time for a personal credit card inventory
“With so many American consumers putting travel on hold, and many facing financial instability, this is absolutely the time to ask yourself if your credit cards match your needs,” says Sara Rathner, a travel and credit cards expert at NerdWallet.
How do you decide if your travel credit cards are still cutting it? Rathner cites a NerdWallet study that found that travel rewards cards provide the most value to consumers who spend $8,600 or more on travel per year or take at least one international trip pear year.
Given the coronavirus pandemic, many who would otherwise meet one of those requirements are falling short this year — and credit card issuers are well aware of this. To compensate for travel benefits that aren’t as relevant for the time being, issuers from American Express to Citi have added new ways to use your rewards, along with additional spending bonuses for grocery and dining purchases.
If you do decide that it’s no longer worth paying the annual fee for any of your cards, Benét Wilson, credit cards editor at The Points Guy, recommends a credit card downgrade. “Do not shut down cards,” she says. “Your credit score will take a hit. Instead, consider downgrading to a lower-cost or free option.”
Your credit score could decrease if you close a credit card rather than downgrading it, because closing a card will reduce your total available credit. Your credit utilization ratio — the percentage of your available credit across all cards that you’re using — is the second-biggest factor in determining your credit score, and you want to keep this ratio as low as possible.
Take advantage of quarantine-era credit card benefits
Nearly every major credit card issuer has adjusted its rewards and benefits to account for our current situation.
For example, Capital One added an option to redeem miles from the Capital One® Venture® Rewards Credit Card and Capital One® VentureOne® Rewards Credit Card to cover food-delivery purchases with services including DoorDash and Postmates, and to cover subscription fees for eligible streaming services such as Hulu and Netflix.
Chase, meanwhile, has introduced Pay Yourself Back for the Chase Sapphire Preferred® Card and Chase Sapphire Reserve®. This feature lets you redeem points for dining, grocery, and home-improvement purchases made with your card — at a rate of 1.25 cents per point with the Sapphire Preferred, and 1.5 cents per point with the Sapphire Reserve. This is the same value you’d get from your points when redeeming through the Chase Ultimate Rewards travel portal, so it’s a very solid option to consider if you want to save money but don’t want to sacrifice value from your credit card rewards.
“Even as states reopen, not everyone is ready to go out into the world, so I expect people to keep using these pandemic benefits,” says Wilson.
Consider switching to cash back
“Consumers who don’t travel as much may find that cash-back cards are a better fit,” says Rathner. Even though many travel cards have added non-travel benefits over the last few months, this could be a good time to switch focus — especially if you already have a sizeable stash of travel points.
“I’ve personally switched to mostly cash-back cards. I had some award travel booked for this that I had to cancel, so I have a comfortable stash of miles and would rather get cold, hard cash! I’ve redeemed more than $500 in cash back this year thanks to sign-up bonuses and careful card selection,” Rathner said.
There are several advantages to using cash-back cards. For one, there’s no danger that your rewards will go to waste, because the money you earn can simply be applied to your card statement to reduce your out-of-pocket costs. Additionally, cash-back cards have lower annual fees than travel rewards cards — if they have annual fees at all. The Citi® Double Cash Card, for instance, has no annual fee, while the ultra-premium The Platinum Card® from American Express charges $550 a year.
Check your credit report
Wilson also recommends checking your credit report to “clean up any errors so if you do want to get a new card, you’ll be ready.” According to a study by the Federal Trade Commission, one in five consumers have errors on their credit reports that could result in less favorable terms for loans, such as higher interest rates.
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Luckily, it’s easier than ever to check your credit report for free. The three major credit-reporting bureaus — Experian, Equifax, and TransUnion — are offering free weekly access to your credit report through April 2021.