Originally posted on: www.iquanti.com
If you’re eager to travel after spending much of the past year at home because of the COVID-19 pandemic, you may want to consider opening a travel credit card, if you don’t already have one.
A cash rewards credit card can certainly have benefits when traveling—after all, putting extra money back in your pocket is helpful no matter what you decide to spend it on—but a travel credit card might give you a better bang for your buck depending on how you plan to travel and how frequent of a flyer you are.
However, picking up a travel credit card doesn’t mean you should drop your cashback card. In fact, you may be able to maximize your rewards by keeping them both in your wallet — and improve your credit score at the same time. Read on to learn how.
Many travel credit cards offer great value when points or miles are used for travel expenses, but not as good of a return when points are used for retail purchases or as statement credits. What’s more, it can take a while to build up enough rewards for a round-trip flight or a hotel stay. Even if you’re still wary of traveling now, you can build up your rewards for trips down the road as most travel cards don’t have blackout dates.
While you’re playing the long game with your travel card, cashback rewards can reward you with some extra spending cash right now. In particular, cashback cards can provide better value when used for statement credits. If both your travel and cashback cards have distinct bonus categories, such as a bonus for dining out on your travel card and a bonus for online shopping on your cashback card, you can get the best of both worlds by shopping smart.
Credit score benefits
In addition to maximizing rewards between great cashback and travel credit cards, keeping both a cashback and travel credit card open will also help your credit score stay glowing.
There are two factors in particular that can affect your credit score when you open an account: your average account age and your credit utilization ratio. Credit bureaus want to see an older average account age, so maintaining current accounts will help ease the minor ding of opening a new credit card.
If you have a revolving balance, opening a new card can also improve your credit utilization ratio. This ratio is the amount of your total credit that you’re using — so if you currently have a $2,000 debt on a card with a $5,000 limit, you’re using 40% of your available credit. However, if your new credit card has a limit of $4,000, you’re now using about 22% of your available credit. Generally, you want to keep this number below 30% — but keep in mind this only works if you don’t build up revolving debt on your new travel credit card.