Americans not redeeming accrued travel rewards – survey

While a majority of Americans say that using their credit or debit card to earn travel reward points makes financial sense, few of them are actually taking advantage of those perks to save on their hotel and airline costs. That is one of the findings of a survey of more than 1,000 U.S. adults conducted on behalf of the American Institute of CPAs.

Conducted in June by Harris Poll, the survey revealed that only 15 percent of Americans have ever paid for part or all of a trip with rewards points, only seven percent used reward points to pay for any part of their most recent vacation, and only one in a hundred (one percent) paid for their entire trip using points. Those figures are particularly interesting in light of other surveys that show airline miles are steadily becoming easier to use.

The results of the survey, which included both airline miles and hotel loyalty programs, suggest that the majority of travelers view the accruing of points as simply a perk of their loyalty to a small number of airlines or hotel brands rather than something they actively work to accumulate.

Only 12 percent of respondents said they have opened a credit card in order to obtain hotel or airline rewards. Six percent of those queried said they have selected a more expensive flight or hotel to earn travel rewards points, and six percent have taken a trip just to maintain or upgrade a rewards level.

As the proverb says, “There’s no such thing as a free lunch.” Or airline miles.

“When chasing after elite status with hotels and airlines, it’s important to not lose sight of the fact that miles and points often have a dollar value associated with them,” Gregory Anton, chair of the AICPA’s National CPA Financial Literacy Commission, said in a statement. “Spending extra money in hopes of earning free nights and flights has the very real potential to leave Americans feeling like they’ve been travel hacked when their credit card payments are due.”

The survey also found a disconnect between the card features people said were most important and their knowledge of those features. A low annual percentage rate (APR) was cited by 37 percent as being the most important feature, with 28 percent saying their priority was a card with a low or no annual fee.

However, despite the declared importance of these features, Americans were woefully unaware of the values of the cards they owned with less than half (43 percent each) saying they knew even the approximate APR or annual fees, the AICPA said. Even fewer (37 percent) knew the approximate finance charges they paid to their credit card company in the past year.

An awareness of fees and charges is particularly important for those who use co-branded “affinity cards” to earn airline miles or hotel points. Such cards often have significantly higher annual fees and APRs than unaffiliated cards.

Citibank AAdvantage MasterCard and Diamond Preferred MasterCard
Citibank credit cards
For example, Citibank (NYSE:C) issues credit cards that earn miles for the American Airlines AAdvantage program as well as the unaffiliated Citi Diamond card. While the interest rates are variable, at this time the APR for the AAdvantage Platinum Select cards is 15.49 percent compared to 6.49 percent for the Citi Diamond Preferred card. In addition, the AAdvantage card has a $95 annual fee while the Diamond card has no annual fee.

“This cavalier attitude towards the specifics of their credit situation may be the reason why nearly one-in-ten of Americans (nine percent) have been denied a loan or paid a higher interest rate on a loan due to a poor credit score in the past year alone,” the AICPA statement said.

While acknowledging that the possibility of scoring a free flight or hotel room can be tempting, the National CPA Financial Literacy Commission offered some advice to those who choose to take advantage of credit card rewards.

Don’t overspend to earn travel rewards. The rewards may not be worth the pain if you end up paying interest and penalties on unpaid balances. Even if you pay your balance in full, you could be wasting money on unnecessary items just to earn the travel reward. In addition, if you earn a free flight, for example, keep in mind there are vacation-related expenses such as hotel, meals, and sightseeing that could strain your budget.

Pick a card that fits your needs. Before applying for a credit card for travel rewards, determine what is most important to you. If flexibility is your goal, seek cards which allow users to transfer points between companies, such as hotels and airlines, and/or between family members. In that same vein, cards that offer cash back give you great flexibility to use the cash however you want. If you frequently travel internationally, cards that waive foreign transaction fees, which are often as high as three percent, could be helpful for you.

Look for cards with big sign-up bonuses. Your credit score could take a hit if you open too many credit cards in a short period of time, so choose carefully when applying for cards. Likewise, many cards waive an annual fee for the first year, and your credit score can be lowered if you close several cards after only a year. Therefore, try to find cards that have large sign-up bonuses, which is increasingly important since many programs are requiring more points to earn rewards. It’s even better if you earn rewards with one purchase or a fairly low spending threshold. If you have to sign up for several cards to earn bonuses, you may have to overspend to earn them.

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