credit & debt

A Great New Travel Rewards Card -- Without an Annual Fee

PenFed Pathfinder Rewards American Express is a good new option of no-fee travel rewards cards.

Credit card issuers are competing hard to get you to sign you up for their cards. A popular inducement: premium travel perks, such as credits toward travel purchases and access to airport lounges.

The newest entry, the PenFed Pathfinder Rewards American Express card, holds one notable advantage over the competition: It charges no annual fee, so even occasional travelers can take advantage of its features without worrying about the math.

Two benefits stand out most for the no-fee card. All cardholders receive an automatic yearly reimbursement of up to $100 for incidental airline fees charged to the card, such as fees for day passes to enter airport lounges for qualifying airlines or charges for baggage or in-flight food and entertainment. You don't have to pick one carrier—charges from any of 11 U.S.-based airlines (including American, Delta, United and Southwest) are eligible. And cardholders are reimbursed for the application fee for TSA Precheck ($85) or Global Entry ($100) every five years (the fee for each program covers five years of membership).

When it comes to earning points on everyday spending, cardholders who are military members or have an Access America checking account with Pentagon Federal Credit Union get the best rewards. They earn four points per dollar on travel spending—and the list of qualifying transactions is broad, from airline and hotel purchases to Uber and Lyft rides, Airbnb stays, tolls, and train, taxi and bus fares. Other customers earn three points per dollar on travel spending, and all cardholders earn 1.5 points per dollar on non-travel purchases. If you spend at least $2,500 in the first 90 days of card membership, you'll get 25,000 bonus points.

To get maximum value from the points, use them to book travel through PenFed's shopping portal. Points are worth an average of 1.18 cents apiece for travel redemptions, but the value varies depending on the booking. A last-minute reservation for a direct flight may yield a value of only 0.85 cent per point, for example, while a hotel booking could come with a value as high as 1.27 cents per point. Based on a 1.18-cent point value, the average effective return on travel purchases is about 4.7% for military members and Access America account holders (3.5% for everyone else). Take a pass on gift cards and merchandise—points are worth only 0.85 cent each for those redemptions.

Along with benefits such as roadside assistance, baggage loss and delay insurance, and extended warranties and return protection on retail purchases, cardholders get other Amex perks, including access to ticket presales for concerts and other events, discounts and additional freebies (such as breakfast and room upgrades upon arrival, when available) at certain luxury hotels, and a 20% discount on the bill or a free appetizer or bottle of wine at select restaurants.

How It Stacks Up

The PenFed card compares favorably with other no-fee travel rewards cards. BankAmericard Travel Rewards, for example, offers 1.5 points per dollar on all purchases. (One exception: You'll earn three points per dollar on bookings you make through Bank of America's Travel Center portal.) Points are redeemable at a rate of a penny per point for statement credit on travel purchases you've made on the card, for a return of 1.5% on most spending (3% on Travel Center purchases).

Like PenFed Pathfinder, BankAmericard Travel Rewards is most attractive for those who have a wider relationship with the issuer. If you have an active checking or savings account with Bank of America, you'll get a 10% bonus on points earned. Bank of America Preferred Rewards customers get a bonus of 25% to 75%, but you must keep at least $20,000 in bank or investment accounts to qualify for Preferred Rewards.

For the most part, the potential for both earning and gleaning value from points is greater with PenFed Pathfinder. But BankAmericard Travel Rewards may be a better choice if you prefer to redeem points in a more straightforward and consistent manner or if you get a considerable bonus through your relationship with Bank of America. (Bank of America customers should also take a look at the Bank of America Premium Rewards card, which charges a $95 annual fee and offers a standard rate of two points per dollar on travel and dining purchases and 1.5 points on everything else—and the 25% to 75% boost is available for Preferred Rewards customers. The card also includes a $100 yearly credit for airline incidental fees and a TSA Precheck or Global Entry application fee reimbursement every four years.)

Another competitor to consider is Chase Sapphire Preferred. Its $95 annual fee is waived the first year, and it offers two points per dollar on travel and dining purchases and one point per dollar on other spending. Points are worth 1.25 cents apiece when you use them to book travel through the Chase Ultimate Rewards portal, yielding an effective return of 2.5% on travel and restaurant purchases and 1.25% on everything else. If you decide to exchange points for cash or gift cards instead, you'll get a decent rate of a penny per point. And the Chase card offers one particularly valuable feature: You can transfer points at a 1:1 ratio to partner airline and hotel loyalty programs, including Southwest Airlines Rapid Rewards, United MileagePlus, Marriott Rewards and World of Hyatt. In that case, the value per point could exceed 1.25 cents, depending on the program you use and how you redeem the points within it.

The Fine Print

PenFed Pathfinder Rewards (annual percentage rate: 11.99% to 17.99%) charges no foreign transaction fee, and there are no caps on points you can earn (but points expire after five years). You must be a member of Pentagon Federal Credit Union to get the card, and anyone can join by paying one-time dues of $17 to Voices for America's Troops or the National Military Family Association and depositing $5 or more in a PenFed savings account.

If you open an Access America checking account, you must maintain a $500 daily balance or have a $500 monthly direct deposit to avoid a $10 monthly fee.

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