Annual Travel Credits: What Are They?

These days, more and more issuers are positioning their credit cards as premium products, charging equally premium fees. The annual travel credits that come with these cards help to offset hefty annual fees by giving you a break on some common travel expenses.

Travel credits reimburse you for specific types of travel charges that you put on your credit card. When you make a charge that is eligible to receive a travel credit, the card issuer will credit your statement for the full amount, often automatically. You can think of travel credits as an automatic gift card from your issuer that covers certain eligible expenses.

What Can You Use Annual Travel Credits For?

You can use travel credits for all sorts of travel-related expenses. Some charges that may be eligible for a travel credit include:

  • Flight change fees
  • Seat upgrades
  • Airport lounge passes
  • Baggage fees
  • In-flight meals and entertainment
  • Rideshare fares
  • Airline gift cards

Not all annual travel credit are created equal
It’s important to note that individual  cards and issuers have different rules surrounding what expenses are eligible for a travel credit.

Some cards will give you a credit for nearly any travel-related purchase. Others have a very specific list of the types of charges that are eligible.

You should know exactly what charges are eligible for a credit from your card issuer, because if you make an ineligible purchase expecting to receive a credit, you’ll be left footing the bill.

Other types of travel credit
Most of the credits listed above are related to direct purchases from airlines and travel companies. Many premium credit cards also offer credits towards programs like TSA PreCheck or Global Entry. These programs can help you speed through security lines and customs when you travel.

Credit related to TSA PreCheck and Global Entry are usually separate from the other annual travel credits offered by the card.

Annual Travel Credits Offset Annual Fees

Most credit cards that offer annual travel credits carry hefty annual fees, like the Chase Sapphire Reserve which costs cardholders $450 per year. Paying that much every year just for the privilege of holding a credit card can be hard to stomach, no matter what benefits you receive.

The annual travel credits offered by these cards help make those fees more manageable, though. For example, the Chase Sapphire Reserve card offers $300 in travel credits each year, making its effective annual fee $150 — a far cry from the $450 listed on its application.

It’s much easier to justify paying a $450 annual fee for a premium card if it offers a broad travel credit worth over 60% of the fee. All you have to do is make sure to use the full travel credit each year.

How to Use Annual Travel Credits

Most travelers will find that using travel credits requires little to no effort on their part. Just spend on the same travel purchases you would otherwise.

Seat upgrades
You’re about to leave on vacation, and decide you could use a little more leg room on the plane. You have tickets to fly on JetBlue and an American Express Personal Rewards Gold card. You designate JetBlue as your airline of choice in the American Express app, then speak to someone at the JetBlue counter to arrange a seat upgrade.

You pay the charge using your American Express Personal Rewards Gold card, and the total comes to $35. A few days later, you get a credit of $35, essentially getting  extra leg room for free.

Getting around town
You’re in a new city for the weekend and need a quick way to get downtown. You order an Uber using your Chase Sapphire Reserve card and spend a fun night out. You then Uber back to your hotel. Because the Chase Sapphire Reserve card offers credits on Uber — and nearly any other travel expense — you’ll see a credit for the cost of your rides within a week or two.

Visiting an airport lounge
You have a long layover between two legs of your long-distance trip and want to visit an airport lounge to get away from the hustle and bustle of the busy airport. Your Ritz-Carlton Rewards card includes the cost of lounge entry in the list of charges eligible for a credit, so you swipe your card and spend your layover relaxing.

What Cards Offer Annual Travel Credits?

There are many premium cards that offer annual travel credits, but we think these are among the best.

Chase Sapphire Reserve
The Chase Sapphire Reserve card offers what might be the most flexible travel fee credit program.

The card’s $450 annual gives you $300 in annual credits that can be used on nearly any travel expense, including the purchase of airline tickets, incidental fees and ridesharing fares. It’s easy to use the full credit each year because so many purchases qualify.

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American Express Platinum Card
The American Express Platinum card charges a $550 annual fee and offers a $200 annual travel credit. This credit resets each calendar year, so if you only hold the card for one year, it is possible to get $400 in credit while only paying one $550 fee.

The credit offered by American Express is less flexible than the credit offered by Chase. You must choose an airline at the start of the year, and you will only receive credits for purchases related to that airline.

The airlines you can choose are:

  • Alaska Airlines
  • American Airlines
  • Delta Airlines
  • Frontier Airlines
  • Hawaiian Airlines
  • JetBlue Airways
  • Spirit Airlines
  • Southwest Airlines
  • United Airlines

Officially, the credit only applies to incidental fees and in-flight purchases. Some people have had success with getting credits by buying gift cards in the $25-$50 range, though we wouldn’t bank on it.

US Bank Altitude Reserve Visa Infinite
The US Bank Altitude Reserve Visa Infinite Card charges a $400 annual fee, but offers $325 in annual credits, making its effective fee just $75. The credit is quite flexible, applying to nearly any purchase made directly from airlines, hotels, car rental companies, passenger trains, cruise lines, limousine companies, or taxi companies.

Bottom line

Though most premium credit cards on the market charge annual fees in the $400-$600 range, significant travel credits can help offset these fees, making the cards a great bargain. Just be sure to sign up for a card that offers credits that fit your spending habits.

This article by TJ Porter first appeared on CardCruncher and was distributed by the Personal Finance Syndication Network.