Travel rewards card or airline/hotel card? Which is better for you?

Love to travel but the cost of getting out of town is beyond your means? A rewards credit card can come to your rescue. The right product can make your wanderlust dreams more affordable. Travel rewards cards come in two basic varieties — general-purpose and co-branded. 

With each you’ll earn miles or points every time you make a purchase, and when you have enough you can trade them in for things like airfare and hotel rooms. Because most of these products also offer large sign-up bonuses, you can score many thousands of points or miles in just a few months. And both card types are usually equipped with compelling perks that can make your trips more enjoyable. 

There are differences between general-purpose rewards and co-branded rewards credit cards, however. Knowing how each of them works will help you select the right one.

General-purpose travel rewards credit card

These cards are “general” because they offer flexible rewards that you can use without restrictions. You can use the points or miles that you’ve earned at any airline or hotel chain. So if you want to have a wide variety of flights and accommodations options open to you, this product may be the most attractive.

You do have a couple of choices within this category. Some general-purpose travel rewards assign a fixed value for the rewards, which means that they are worth the same amount no matter what you do with them. An example of this type of card is the Capital One® Venture® Rewards Credit Card. Every mile you earn with this credit card is worth one cent for all travel redemption options. To redeem, you log onto the issuer’s website and trade them in for what you want. 

The other type of general-purpose travel rewards card offers transferable miles and points. The rewards you earn go into a centralized pool, and when you’re ready to redeem, you can shift them over to an airline or hotel partner to make the purchase. The value of your rewards depends on how you spend them. For example, with the Chase Sapphire Preferred credit card, 60,000 points may equal $600 in cash, but the points can be worth one, 1.25 or 1.5 cents depending where you transfer them.

Whichever the variation, a general-purpose travel credit card is notable for its flexibility. If you’d like to use your rewards for JetBlue seats on one trip and American Airlines on the next, no problem. The downside?  If you do have a soft spot for a specific airline or hotel chain and want special perks associated with being a loyal customer, they won’t be available to you with these cards.

Co-branded travel credit cards

If you do want your loyalty rewarded, there are a variety of travel credit cards available that are co-branded with a specific airline or hotel chain. Since the credit card issuer partners with the company, both company’s logos will appear on the card. You’ll amass rewards on everything you charge, but will earn the most when you use the card at the affiliated airlines or hotel chain. And when it comes time to redeem the rewards, the airline or hotel chain is where you’ll get the most bank for your buck.

Just one example of an airlines travel rewards card is the United Explorer Card. Chase teamed up with United Airlines for this product, and cardholders earn miles toward airfare on that particular airline. It also comes with airline-specific benefits, such as being able to check your first bag free, priority boarding at the airport and a couple of complimentary passes to the United Airlines Club every year. 

Hotel travel rewards cards work in similar ways to airline affiliated cards. The World of Hyatt Credit Card, for instance, allows you to use the points you’ve earned for Hyatt hotel rooms as well as for upgrades. It offers 50,000 bonus points after you meet the minimum spend ($6,000 on purchases within the first six months of opening the account) which is enough for ten free nights. You’d also get one free night at the hotel every year. Since lodging is a major travel cost, your savings would be dramatic. You’ll also get elite status at the hotel, which comes with additional perks. 

Clearly both variations of travel rewards credit card will take you far for less. If you need to choose between the two, think about your spending habits. A general-purpose travel rewards card will be an excellent choice if you want the greatest flexibility. On the other hand, if you’re devoted to a certain company and want to glean the most out of being a customer, an airline or hotel credit card may be better for you. 

However, if you really want to get around and are a big charger, consider one of each kind. When you have two travel credit cards that you use responsibly (by keeping the debt to zero and paying on time), you can boost the rewards without sacrificing flexibility or loyalty.

Erica Sandberg

San Francisco-based consumer finance journalist whose work appears in a wide variety of top-tier outlets.

Erica’s the resident money and credit authority for KRON-4 News and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” Erica is an amateur hockey player and ballet dancer and has the broken bones to prove it.