With travel rewards credit cards, timing is everything
Travel is a beloved pastime, albeit an expensive one. That’s why many consumers love travel credit cards: They can earn points or miles toward free trips every time they make a purchase. But according to a new NerdWallet study, consumers miss out on an average of 15,338 points — worth an average $177 — by applying for travel cards at the wrong time.
The study analyzed NerdWallet’s internal data on when issuers increase their sign-up bonuses and when consumers apply for cards. It found a large discrepancy between when people actually apply and when they “should��� apply, based on when the highest sign-up offers are available.
The analysis found that 83% of applications are for cards that do not have a limited time sign-up offer in effect. That costs applicants 5,000 to 50,000 bonus points, depending on the card in question. That’s potentially hundreds of dollars worth of free travel lost due to bad timing.
Timing is everything
Much like you may wait for a coveted item to go on sale before you buy it, there’s money to be saved (or earned) by holding out for a better credit card offer. It’s natural to apply for a card when you think you need it, but it’s generally better to apply when the sign-up bonus is higher than normal.
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The “best” time to get a good deal varies by card, but there are patterns according to card type. Limited-time offers for general travel cards and airline cards were available most often in November, but most consumers applied for them in July and January, respectively. For hotel cards, the best offers showed up in August, but more consumers were applying for these cards in April.
So how do consumers make sure they get the best deals?
“Stay flexible. If you have a rewards card that is serving you well for the time being, consider holding off on getting your next card until an outstanding offer comes along for a card you’d like,” says Sean McQuay, NerdWallet’s resident credit card expert and former strategy analyst at Visa. “Your patience could translate to thousands of points, worth hundreds of dollars.”
Weigh the pros and cons of waiting
Holding out for a better card offer isn’t always the best strategy; it’s also important to weigh the opportunity cost of lost rewards. Consumers without a rewards credit card may decide that it’s not worth it to wait, because the rewards they won’t earn in the meantime could outweigh the difference between the card’s regular sign-up bonus and what they would get from a limited time offer.
Here’s a helpful example: If a consumer spends $2,000 a month on his or her credit card, earning 1 point per dollar spent, that’s $23.20 in rewards per month (using an average redemption value of 1.16 cents a point). If the consumer had to wait eight months for a better deal, that adds up to $185.60 in missed rewards — more than the $177 to be gained, on average, from waiting.
The decision depends on multiple factors, including your spending habits, the value of a card’s rewards, and the frequency with which the card has limited time offers. In the end, it’s your call: Apply now and start earning rewards immediately, or bide your time in the hope of bigger rewards down the road.
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Erin El Issa is a staff writer at NerdWallet, a personal finance website. Email:erin@nerdwallet.com. Twitter:@Erin_Lindsay17.
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