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As I’m starting to plan my family’s summer vacations, I’ve realized that one of the existing cards in my wallet could help me earn more rewards than ever before.
You see, most of our relatives live across the pond, in Spain. So, most of our summer travel plans usually involve trying to find the best (as in cheapest) transoceanic flights and where to stay in those places we’d drive or take the train to after visiting our family in Madrid, Murcia or Bilbao (Porto? Paris? Yes, please).
But that was until last year – before I started working for CreditCards.com and (happily) converted to the rewards game.
Getting into the rewards game
These days, finding the card that will yield my family the highest rewards during our annual Iberian sojourn has become as important as scoring that increasingly elusive cheaper-than-a-thousand-bucks round trip to Spain without having to drive three hours from Austin, Texas, to either IAH (Houston) or DFW (Dallas) first.
Aware as I was of the 3 percent foreign transaction fee that one of my favorite cards – Citi’s Costco Anywhere Visa – used to charge, last year, weeks before our departure for Barcelona, I started shopping for a new credit card that wouldn’t charge any fees when I used it abroad.
Since I’d just started dabbling with rewards, I opted for a no-annual-fee credit card with a modest-but-easy-to-earn sign-up bonus – $150 after spending $500 in the first three months – and a generous 1.5 percent cash back flat rate on all purchases: Capital One’s Quicksilver.
Quicksilver was a great card to bring along, as it was accepted virtually everywhere and, every time I paid, I knew I was getting a little bit of cash back without incurring any fees for charging overseas.
However, during our summer trips overseas, most of our expenses usually revolve around two categories that the Costco Visa card rewards more generously than Quicksilver: restaurants (3 percent cash back) and gas (an impressive 4 percent cash back on the first $7,000 per year, then 1 percent after). Airfare and hotels also go on that card, as it offers 3 percent cash back on travel.
Still, before applying for the Quicksilver card, I did the math. If I paid at restaurants using the Costco card, the cash back bonus would essentially take care of the 3 percent foreign transaction fee, but I wouldn’t earn any extra cash back – you win some, you lose some, right?
If I filled the tank on my mother-in-law’s borrowed VW Golf using the Costco card – between $50 and $70 a pop, as gas in Spain currently costs around 4.5 euros, or $5.60, a gallon! – the 4 percent cash back would cover the foreign transaction fee and still give me 1 percent extra.
Not bad, you might say. But here’s what I’ve learned about the rewards game so far: As long as you don’t carry a balance and avoid unnecessary fees (the Costco card doesn’t charge an annual fee, by the way, but you need to be a Costco member in order to qualify), cash back and rewards are basically free money you’re leaving on the table if you don’t use the right card.
Costco Visa Anywhere bids adiós to foreign transaction fees
This year, as I was already exploring my options for a new rewards card with a generous sign-up bonus to cover part of our summer trip (50,000 points, anyone?), Citi announced that starting today, January 26, it is removing the foreign transaction fees from its Costco Anywhere Visa card.
That’s great news for cardholders who, like me, are regular Costco customers who enjoy the generous cash back rewards offered by the card, but who would otherwise think twice before bringing it along on an overseas trip.
Upon learning that the Citi Costco card was joining the no foreign transaction fee crowd, I quickly ran some numbers, using our last summer trip’s expenses as an example, to see whether the Costco card deserves to take a slot next to my passport come June.
Paying with the Capital One Quicksilver card, I earned $30 cash back during our trip at a flat 1.5 percent rate – $6 on gas and $24 on restaurants.
Had I been able to use the Costco card without incurring foreign transaction fees, my cash back earnings would have more than doubled: $64.24 – on gas I’d have earned $16.24 at 4 percent, and $48 on restaurants at 3 percent. (Yes, you eat out that much when in Spain, the food’s so good!)
So, while the allure of scoring a big sign-up bonus on a new rewards card might still win me over (I’m looking at you, Chase Sapphire cards), I feel confident that, regardless, I’ll maximize cash back rewards on my next summer trip by using both of my existing cards – the Costco card for travel, dining and gas, and Capital One Quicksilver for everything else.
Now if only I could find a card that gave me an extra bonus for gourmet shopping at El Corte Inglés!
See related: How to use card rewards, hotel categories to book the perfect stay, Overseas travel: Tips to use your credit card, mobile banking worry-free