Nearly half of millennial travel credit cardholders have canceled their card during the pandemic

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With fewer opportunities to travel, most cardholders are still saddled with an annual fee

At one point during the coronavirus (COVID-19) pandemic, air travel was down 96 percent. Hotel bookings have cratered. Cruise ships remain tied up at the pier.

So maybe it’s no surprise that consumers would begin asking themselves why they’re paying an annual fee to carry a travel rewards card. Many millennials have apparently decided it’s no longer worth it.

A new ValuePenguin survey shows that 41 percent of millennial travel cardholders closed a travel rewards card since the beginning of the pandemic. Another 34 percent say they’ve thought about doing it.

More than half of those who were laid off or furloughed have cashed out some or all of their points or miles due to the pandemic's impact on their ability to travel. Again, a significant group -- 23 percent -- is considering it.

Not that surprising

In a way, the numbers are not surprising since many travel rewards cards carry hefty annual fees. While the points and miles can be very rewarding, some cards charge more than $100 a year to cardholders.

With the pandemic discouraging consumers from traveling, there’s little opportunity to rack up miles and points. But cardholders still have to pay the annual fee.

The survey also found that 28 percent of Americans who booked a trip using their travel rewards lost their miles and points when they had to cancel the trip due to the pandemic. 

"It doesn't surprise me at all that many people are closing travel cards right now," said Matt Schulz, chief credit analyst at LendingTree, ValuePenguin's parent company. "Many Americans are simply trying to keep food on the table, and hoarding travel miles and points just doesn't make any sense for a lot of people at this time."

Credit score impact

Canceling a credit card will have a negative impact on your credit score. Your access to credit is one part of the score’s formula, so your score will dip when the amount of credit is lowered. However, in most cases, the decrease is small and temporary.

Amid all the account-closing, some consumers are actually applying for new travel rewards credit cards. Forty-five percent of millennials have applied for a new card since March. Schulz says it could be a sign of optimism.

“Americans love travel, and many cannot wait for the day when they can get back on a plane,” he said. 

Even if that’s the case, Schulz and other personal finance experts say there may be better choices when it comes to a credit card. A simple cashback card may be more rewarding and rarely carries an annual fee.

If you’re considering applying for a new credit card, ConsumerAffairs’ guide to the “Best Credit Cards” may help you pick the one that’s best for you.

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