Credit Card of the Week: A Rewarding Venture for Some

Tim Beyers
Updated
Venture card
Venture card

Banks offer all sorts of credit cards. For the savers, there are cash-back cards. For the indebted, there are balance transfer cards. For the shoppers, there are retail cards. For the ignorant, there are these beasts -- the five worst cards of 2011. And for travelers like me, there are rewards cards.

If vacations are your comfort food, "rewards" cards that grant miles or points for each dollar purchased may be an appropriate indulgence. I say "may be" because these cards generally trade higher interest rates and unfavorable balance transfer deals for heaps of points that have little relative value.

Airlines are the most popular bank branding partners for this type of plastic, in hopes you'll concentrate your travel with them while avoiding their rivals. Every major carrier has one. Most hotel chains do as well.

Traveler-targeted enticements typically include huge sign-up bonuses. For example, United Continental (UAL) and its bank partner JPMorgan Chase (JPM) are offering me 60,000 Mileage Plus miles to take their card. I'm tempted, if only because United has a hub in my hometown of Denver and is therefore the typical choice for our family vacations away.

Yet there's much more than proximity to consider when selecting a good rewards card, such as:

  • How much do the rewards cost? (There's always a price.)

  • How flexible is the system? (Are points transferable? What other value do they have?)

  • What fees are involved? (Annual? Monthly?)

  • What are the limitations? (What's the maximum earning potential?)

The best rewards cards offer maximum flexibility -- any carrier, any hotel -- and generous exchange rates. Does Capital One's (COF) relatively new Venture Card measure up? That's the question before us today in this ongoing series.

3 Things to Know Before You Apply

You might know the Venture Card from TV ads in which actor Alec Baldwin pitches the plastic as superior to other rewards cards. Here's a closer look at the benefits:

1. Universal miles. Unlike rewards cards tied to a single airline or hotel chain, the Venture Card is universal. Spend $1, get two miles. When traveling, you can book directly with the company or pay with your card and get reimbursed at a rate of 10,000 points per $100 spent. The resulting flexibility allows travelers to maximize rewards.

2. Cheaper balance transfers. While 11.99% is not exactly a cheap rate, a no-fee balance transfer could make sense if you're looking for miles and paying much more than the Venture Card charges. Just be sure to pay the balance off as fast as possible.

3. No cap on rewards. Airline-linked programs tend to want travelers earning points by, you know, traveling with them. Thus, some rewards cards have built-in maximums. Not so with the Venture Card. Earn as much as you can and spend how you want.

The downside? Capital One's Venture Card charges interest at industry standard rates, so don't get this card if you plan to carry a balance! There are much better cards for those digging out of debt.

This Is the Right Card for You If ...

Apply for this card if you're a frequent traveler who treats debt like a disease. You'll get the benefit of high rewards plus the flexibility to book cheap vacation travel paid for by your card issuer.

Say you use a travel bookings engine such as Kayak or Fly.com, services expressly designed to give you the best available deal. Buy tickets with the Venture Card and then apply for a rebate at a rate of 10,000 points for every $100 in fare. You could end up saving hundreds while maximizing your point-earning potential, and therefore your rewards.

Yes, this amounts to gaming the system a little. So be it. It's exactly this sort of skullduggery that makes good rewards cards ... well, good. Again, refer to the checklist above. Flexibility without limits is what you want if you're in the market for a rewards card. On these two attributes, the Venture Card appears to deliver.

Just go in knowing that even if you don't carry debt, Capital One is getting a sweet deal by getting you to charge 50 cents for just 1 cent in voucher value. Make sure you don't overspend just to get miles. Instead, use the card to get extra benefits for the items already built into your budget.

What credit cards do you use? What is the best credit deal you've found? Please let us know using the comments box below.

Motley Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and past columns. The Motley Fool owns shares of JPMorgan Chase.

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