I've been spending more time traveling lately. Most recently, I've been spending the time surrounding Thanksgiving visiting my family on the opposite side of the country. It's always important for me to make sure I'm optimizing the benefit I receive from my spending, so a few months ago, I researched and switched from cash-back rewards to travel rewards credit cards.
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If you pay your credit card bill in full each month, travel rewards credit cards are the fastest way to earn miles redeemable for free flights and other benefits. Most cards offer sign-up bonuses valued enough for a free flight after your first purchase, so as soon as those points are added to your frequent flyer account as miles, you can cash them in.
Credit card companies count on you paying interest or spending more on your card to make up for their expense of providing miles to you, but if you're careful with your card, spending only what you would have spent otherwise and always paying your bill on time, then you emerge from this relationship as the winner. Cash-back credit cards are a good second option, but I find that when you take sign-up bonuses into account, the travel rewards credit cards win.
To make the most of these cards, you are required to remain somewhat loyal to a particular airline. For me, that's not a problem because my local airport is a hub for a major airline that often has the lowest fares to my most frequent destinations. This situation could change in the future, and it's wise to re-evaluate your choices whenever there are changes to prices or airlines.
Use social media to help earn travel rewards. A mobile application available for iPhone or Droid phones —and also available online—lets you earn travel rewards for checking in when you visit various locations. Topguest works directly with Foursquare and Facebook Places to automatically reward points that can be cashed in using a number of rewards programs such as those offered by Hilton and Virgin America. You can also achieve location-specific rewards, like a free round of drinks at the local bar.
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If you're desperate to reach the next threshold of membership, you can buy miles directly from your airline. This can help you qualify for an upgrade or a free flight, and if your account is already close to the value you need, it will cost less money than buying the upgrade or ticket outright.
Keep in mind that airlines and other loyalty programs can change their terms at almost any time. As airlines merge to avoid bankruptcy and look for more ways to cut costs while keeping fares down, I expect the value of rewards programs to gradually decrease throughout the next few years. Use the points as soon as you can. If you want to accumulate more than you need, you run the risk of losing them or finding they're worth less than they are now.
Luke Landes writes for Consumerism Commentary, where he encourages discussions about money and consumer issues. Consumerism Commentary regularly tracks and reviews the best credit cards and other financial products.