Are Unused Travel Card Benefits Really a Bad Thing?
I had to buy a T-shirt which I didn’t want until midnight. My credit card carried a $50 credit at Saks Fifth Avenue every six months, so there I was, wading through designer clothes I didn’t want and sorting by price, “lowest to highest,” in order to take advantage of my credit before it expires. .
Welcome to the strange new world of “travel” card benefits.
The pandemic has changed the travel industry in many ways. Airlines now offer more flexible tickets. Masks are mandatory for an indefinite period. And so-called travel cards have turned to offering perks for homebodies, from food delivery credits to Saks credits.
Getting more perks seems like a good thing on the face of it, but it creates a problem I ran into by feverishly buying things I didn’t want or need. In short: the travel card takes advantage of the fear of missing out.
How to assess the benefits of an unused travel card
Do the math
The logic of getting a travel card (or any card with benefits) is simple. If the total value you get from the card exceeds the annual fee, it’s worth it. For example, if a card offers $200 in travel credits per year and the annual fee is $100, that card is probably worth getting if you usually spend at least $200 on travel per year.
Yet there is a part of this math problem that is more than pure dollars and cents. This is what we mean by “value”.
Don’t confuse dollars with value
Warren Buffett said in a letter to investors in 2008: “The price is what you pay; value is what you get.
In other words, just because something costs a certain amount doesn’t mean it’s worth that much.
Take the T-shirt I ordered from Saks. I paid about $50 for it, which is the price. But is this the value I received? This is where things take a turn towards the spongy and the subjective. To me, the shirt is probably much less worth than $50 because I’m not someone who cares much about fancy clothes. A T-shirt is pretty much a T-shirt as far as I’m concerned (and my 6-month-old vomits on my clothes daily, which significantly reduces the value).
In other words, you only get this advantage if you use it a lot. But using it a lot may not align with your other priorities (like spending less on takeout).
Focus on your current spending
One of my travel cards has a $300 annual credit for an Equinox gym membership and a monthly $20 credit for a few particular digital streaming services.
This is great if you already have an Equinox subscription or are subscribed to eligible streaming services. But not so much if you’re not. Equinox memberships cost around $300 per month, so an annual compensation of $300 is a relatively modest discount.
And here’s the crux of the FOMO card-advantage conundrum: It can seem like not using Equinox credit is leaving money on the table. After all, $300 sounds like a lot of money. But just the opposite is true – signing up for all the services associated with your card and trying to get the most out of them could not only be a hassle, but also financially unwise.
As a general rule, you should get (or keep) the travel card that matches your current spending rather than matching your spending to card benefits.
That doesn’t mean you shouldn’t order a “free” T-shirt with a card advantage. But that means you shouldn’t become a frequent Saks shopper just because your card offers $100 annual credit.
The take-out sale
In the days before, choosing and using a travel credit card was a relatively simple proposition. Not so much in the age of COVID. For one thing, many of these cards offer perks that have absolutely nothing to do with travel.
Don’t get carried away with the madness of maximizing benefits. Yes, it’s good to get as many of your card’s perks as possible, but that doesn’t mean you should steer your priorities around the weird perks a card decides to include.
Which reminds me it’s a new year, which means it’s time to order a new shirt from Saks for my baby to vomit.
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