Many Americans are making up for time lost during the pandemic and making travel plans. But according to the Bureau of Transportation Statistics, travel expenses have increased by about 35% since 2020. One way travelers can cut down on vacation costs? A travel credit card.

If you have upcoming travel plans and can qualify for a sign-up bonus offered by a travel credit card, you could save quite a bit. However, travel cards have benefits that can help you save money over time, not just with an introductory offer.

What are travel credit cards, and how do they work?

A travel credit card is a rewards credit card that works similarly to a traditional credit card. The difference is that its reward structure benefits frequent travelers. These cards offer rewards — typically as points or miles — to holders who use them to pay for travel-related costs like flights, hotels, and car rentals.

Once you have enough, you can redeem your points or miles to save on future travel expenses. The catch: These rewards and perks can come with an added cost. Travel credit cards may charge a higher annual fee than credit cards that don’t offer the same type of rewards. The upside: Many travel cards reward new cardholders with a generous sign-up bonus.

For example, the Capital One Venture X Rewards Credit Card charges a $395 annual fee — more than the average $94 fee for most credit cards that carry a fee. Cardholders can earn 75,000 bonus miles after spending $4,000 on purchases within the first three months from account opening. They can also earn a $120 credit for Global Entry or TSA PreCheck®.

Read more: See our picks for the best credit card sign-up bonuses

Perks that come with travel rewards credit cards

While travel credit cards may cost more, the rewards can save enough to cover the annual fee. Some of the most common perks include:

Waived or discounted baggage fees

Bag fees can be costly if you travel frequently. While certain airlines won’t charge passengers for their first bag, this isn’t the case across the board. On average, travelers can expect to pay around $30 for their first bag and, in many cases, more for additional bags. For larger families or groups, luggage costs can quickly add up.

The good news is that many travel card issuers offer free checked baggage. For example, select Delta SkyMiles® Platinum American Express cardholders can check their first standard checked bag for free.

We put Delta Gold and Delta Platinum head-to-head to see which offers the best savings

Rental car discounts and insurance

On average, a car rental in the United States can run about $55 per day, according to data from kayak.com. Fortunately, a travel credit card can help you earn enough points or cash back to pay for part of or all of your car rental.

Car rental companies require that renters have a rental insurance policy in place for the duration of their reservation to cover any damages, accidents, or theft. This can come at an added cost of up to $15 per day, or more, in some cases.

While your existing auto insurance policy may extend to your rental car, credit cards like the Chase Sapphire Preferred® Card, Chase Sapphire Reserve®, and the Capital One Venture Rewards Credit Card all include rental car insurance for you to fall back on.

Travel insurance and trip cancellation

If you don’t have a travel insurance policy, any unforeseen illness or emergency could throw your plans off course, and you could lose most — or all — of the money you’ve spent on trip expenses.

According to AAA, travel insurance policies usually cost around 5% to 10% of the entire trip cost. While these policies can help you save in an emergency, paying a premium to protect your trip is still an added expense that can add up, depending on your travel plans.

Some credit cards offer travel insurance and trip cancellation coverage as an added benefit. That way, you won't lose out on all the money you've spent if your travel plans fall through. Many travel insurance policies also cover lost or delayed baggage, missed connections, trip delays or interruptions, medical evacuations if you require treatment, and accidental death.

Airport lounge access

When you’re making your way through a crowded airport, lounges provide a comfortable space to wait for boarding to begin. Many lounges offer complimentary snacks and beverages that can help you avoid paying a premium for your pre-flight snacks, free Wi-Fi and workspaces, showers to freshen up before a flight, napping rooms, and more. American Express, Capital One, and Chase all offer credit cards with airport lounge access.

Global Entry and TSA PreCheck

Many travel credit cards offer TSA PreCheck® and Global Entry, which provide expedited security screening and expedited U.S. customs screening for international travelers when entering the United States.

You can expect to pay upwards of $70 for your TSA PreCheck® enrollment, plus a renewal fee of at least $70 each time you renew.

When applying for Global Entry, travelers must pay a non-refundable, one-time application fee of $120. Thankfully, a number of credit card issuers can help you save on this extra cost, including the Capital One Venture Rewards Credit Card, Capital One Venture X Rewards Credit Card, and the Bank of America® Premium Rewards® credit card.

Here are the steps you need to take to get TSA PreCheck for free

Flight and hotel upgrades

You may be able to use your credit card rewards to cover all or a portion of the cost of a flight or hotel upgrade. Say you want to upgrade to a business class seat, or you’d prefer a deluxe hotel room instead of a standard room, if you’ve booked your reservations through your card’s travel portal or you redeem those rewards for a statement credit, you could make your travel plans a bit more enjoyable without having to front the entire cost.

Hotel stays

Applying for a travel credit card with hotel perks or a co-branded airline credit card between a major issuer and your preferred airline can help you rake in major savings. Certain hotel credit cards offer discounts on room rates and freebies like complimentary breakfast, late checkout, room upgrades, and free snacks and drinks upon arrival.

The Hilton Honors American Express Surpass® Card offers cardholders the opportunity to redeem points for hotel stays, experiences, on-property rewards, and more. They’ll also benefit from other bonuses like Free Night Awards, free room upgrades, free Priority Pass lounge passes, baggage insurance*, and purchase protection (terms apply).

No foreign transaction fees

Another way your travel card can help you save is on purchases you make abroad. You might see a foreign transaction fee when you make a purchase outside the U.S. or from a foreign merchant — usually 1%–3% per transaction, although all cards don’t charge it. Many travel card issuers anticipate that cardholders will use their cards overseas and don’t charge a fee as an added money-saving perk.

Check out our list of the best credit cards with no foreign transaction fees

How to select a travel credit card

When selecting a travel credit card, there are a few key factors to consider to pick the right card.

Your travel habits and loyalty programs

If you’re a creature of habit and generally stick to the same hotels and airlines when you travel, it may not be a bad idea to get a co-branded credit card through your favorite hotel or airline.

A co-branded credit card offered by one of the major issuers in partnership with your preferred hotel or airline can help you save through exclusive discounts and rewards. If you pair your travel credit card with the discounts rewards offered by your favorite brand’s loyalty program, you can double your savings.

The Citi® / AAdvantage® Platinum Select® World Elite Mastercard®, for example, offers cardholders 50,000 bonus miles after making $2,500 in purchases within the first 3 months of account opening. What’s more — cardholders can get their first checked bag for free on domestic American Airlines itineraries and save 25% on in-flight purchases.

The cost of a new card

While rewards cards can help you save, your credit card company may charge you a higher annual fee for all these added perks and benefits.

If the annual fee can pay for itself through the savings you’ll be able to take advantage of, getting a travel card may be worth it. Say you often travel for work and can earn rewards for those frequent trips. However, if you’re not a regular traveler and won’t be able to fully reap the rewards of your card, an annual fee can put extra pressure on your budget.

It’s also important to make note of any limits your card issuer has on the amount of rewards you can earn within a given period and select a card that gives you the most significant earning potential and money-saving rewards at the lowest cost.

Adding a new credit card to your wallet can also significantly impact your credit score and your finances. Taking stock of how many cards you currently own, whether your budget allows for another minimum payment, and how much you stand to save based on your spending habits can help you decide if a new card will help or hurt you in the long run.

This article was edited by Rebecca McCracken

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*Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.