Credit Card for a Beginning Business Traveler

I received this (brief) query from someone I know who just got a job where he will be traveling for business:

“So I want to get a new reward card for travel, any ideas?”

I could have been glib and asked him to just read all of my posts here for the last couple years, but lets see if I can condense that information.

Really the answer depends on what you are trying to accomplish.   Your goal should always be to maximize your return ratio.    That is the value of your reward for every dollar spent.    That said, the question arises as to whether or not you should get a travel rewards card or a simple cash back rewards car.

The Travel Rewards Route

Travel reward cards can produce rewards valued at 3-4% of the amount charged, but only when used used wisely, and usually for travel booked well in advance.   If you want to jet off to Hawaii next week, you probably won’t find much value in your miles.   If you can find award seats, they will certainly be for double the miles, and you will likely have to pay an additional redemption fee for travel less than 21 days in advance.

If you are flying one airline most of the time, you probably should get the reward card for that airline, especially if you are able to purchase travel on your own credit card and be reimbursed by your company.    This is because most airline credit cards will give you double miles on purchases at that airline.    Also, just having the credit card will often result in additional airline perks such as companion vouchers, waived luggage fees, and discount lounge memberships, depending on the airline.

The same story holds true for hotels.    If you have the ability to chose which hotel you stay in, and you get to pay for the room on your personal card, then you should probably try to get the reward card for your favorite chain.   You will quickly earn hotel points and status that will result in free rooms and upgrades.

Whether or not your favorite hotel chain is Starwood, which includes Westins and Sheratons, you might just want to get the Starwood American Express card.    Among the reward travelers in the know, the Starwood Card is the gold standard.    It achieves that status because Starwood Points are so incredibly flexible and valuable.   Starpoints can be converted to points at dozens of airlines at 1:1.25 rates.     For example, 20,000 StarPoints gives you 25,000 Delta SkyMiles, better than the Delta Amex.  If you redeem StarPoints for hotels, you get access to Westins and Sheratons at reasonable rates with no blackout dates or capacity controls.    If there is a room available for sale, you can redeem your points for it.   That is just unheard of  these days when it is common to hear from an airline that they have no reward availability to your destination for a reasonable amount of miles for months on end.   Finally, those who spend $30,000 a year on their Starwood Amex get Starwood Gold status, which entitles you to all sorts of upgrades and perks you they stay at Starwoods.

The Cash Back Card Route

As hard as it is for me to imagine, for some people, travel is not their goal in life.    For those people, a simple cash back card is great.    Currently, the best cards out there offer 2% cash back, like the Schwab Bank card.     It is nice to know that if you charge $1,000 in reimbursed travel expenses, you are getting an additional $20 bonus that is essentially tax free.    I am not an accountant or a lawyer, but my understanding is that since this is really just a discount on your purchases, and not money earned, you don’t pay taxes on it.   On the other hand, your company will always reimburse you for the amount you charge, and will never take into account any rewards or cash back you get through your credit card.    The ultimate result is that your 2% reward is probably the equivalent of 2.6% or so post tax value.

Of Course…

None of this really matters unless you are paying your balance in full every month.   If you do, the rewards are a bonus, and you probably even make a little interest on the reimbursements that come in for some time before your bill is due.

If you are not paying your bill in full, you are getting screwed on so many levels.   First, a reward card will have a higher interest rate than other cards.    Secondly, you are paying interest on your charges from the moment you swipe your card, so you are never really being reimbursed for all of your expenses.     In that situation, it might make sense to have a separate card for business expenses only, and be sure not to confuse the reimbursements with your personal bank account.   In that way, you will never be tempted to “borrow” some of your reimbursements to pay your personal bills.    If you have to, you might even consider just endorsing your expense checks to the credit card company and putting them straight in the mail to them.

Play the game right, and your rewards for business travel will be substantial.