How It Works, Cards That Have It

With the start of summer just a few weeks away and vaccine distribution in full swing, the open road is calling out to many Americans. A spring or summer road trip is becoming a popular, socially-distanced alternative to flying, and it can be a great way to spend quality time with family or friends.

If this road trip requires a rental car, you’ll want to make sure that you’re covered by either your personal auto insurance policy or by your credit card. Most travel rewards cards come equipped with special car rental insurance which allows you to skip the rental company’s insurance.

Ahead, Select explains how credit card car rental coverage works, and reviews the best credit cards for road trips, with information on the car rental insurance coverage you get with each.

First and foremost, if you want to be covered by your credit card’s car rental insurance you must pay for the full rental cost (plus fees) with that card.

Typically, the cardholder also must be the primary renter, though other drivers are often covered if they are on the rental contract. Finally, your credit card’s terms usually require that you decline the car rental agency’s Collision Damage Waiver (CDW), which would cover damage to the rental vehicle (but not bodily damage or damage to other vehicles).

But don’t worry: Opting out of the car rental agency’s CDW simply makes it possible to use the coverage provided by your credit card in the event of an accident. Just make sure that you know exactly what your card covers and whether it offers primary coverage and/or secondary coverage.

Not all types of cars are covered under a CDW. Luxury cars and recreational vehicles, for instance, are often not included. There’s also usually a limit on the number of days that you can take out coverage, often up to two weeks (14 days) or a month (31 days).

Most credit cards offer secondary coverage, which means the coverage kicks in after your personal car insurance policy. In the case of an accident, theft or damage, you’d first need to file a claim with your own car insurance company before submitting a claim through your credit card’s insurance provider. If you don’t have a personal auto insurance policy (i.e. if you don’t own and/or drive your own car), secondary coverage may still kick in — just check your policy to make sure you’re covered.

Primary coverage, on the other hand, is just like the name suggests. With credit cards that offer primary insurance coverage, you can submit an accident claim right away by calling the number on the back of your card, without first submitting to a personal policy.

Liability coverage isn’t included in most credit card and/or rental car CDWs, which only cover damage to and/or theft of the rental car (but not bodily damage or other personal property damage). If you’re involved in an accident resulting in injury to another person, you probably won’t be covered.

Full liability protection comes with the rental company’s insurance. You typically have to add it on at the counter and/or at the time of reserving the car, unless you have extended rental car coverage through your personal auto insurance policy. Liability protection is likely more expensive for rental cars than for your own car; it runs about $8 to $25 per day. Some countries may actually require that you opt into liability coverage when renting a car.

Select reviewed our best credit cards and chose the following options as the best credit cards for road trips. Below, we include details about each card’s rental car coverage.

The Chase Sapphire Reserve® and its lower annual fee cousin, the Chase Sapphire Preferred® Card, both provide primary car rental coverage for car rentals in most countries. These cards offer coverage for rentals of up to 31 consecutive days at a time. The Sapphire policy covers losses, including physical damage and/or theft of the rental vehicle, valid loss-of-use charges assessed by the rental company and reasonable and customary towing charges related to a covered loss.

View the Sapphire benefits guides for more in-depth info on rental car coverage:

The PenFed Platinum Rewards Visa Signature card comes with Visa Signature perks including a secondary auto collision damage waiver (CDW) that reimburses cardholders for the covered theft or damage as well as valid administrative and loss-of-use charges imposed by the auto rental company and reasonable towing charges that occur while you are responsible for the rental vehicle.

Coverage lasts up to 15 consecutive days within your country of residence or 31 consecutive days outside the U.S.

To determine which cards offer the best value, CNBC Select analyzed 234 of the most popular credit cards available in the U.S. We compared each card on a range of features, including rewards, welcome bonus, introductory and standard APR, balance transfer fee and foreign transaction fees, as well as factors such as required credit and customer reviews when available. We also considered additional perks, the application process and how easy it is for the consumer to redeem points.

We also estimated how much the average consumer would save over the course of a year, two years and five years, assuming they would attempt to maximize their rewards potential by earning all welcome bonuses offered and using the card for all applicable purchases. All rewards total estimations are net the annual fee. Our final picks are weighted heavily toward the highest five-year returns, since it’s generally wise to hold onto a credit card for years. This method also avoids giving an unfair advantage to cards with large welcome bonuses.

For balance transfer cards, we used a Bankrate calculator to tally the interest rates and fees you could incur if you transferred $6,028, the average balance Americans carry on their credit cards in 2019, according to Experian.

If the average consumer with a $6,028 balance on their credit card pays $200 each month, they will spend $1,911 in additional interest, assuming the average 17.7% APR. And it will take them 40 months — more than three years — to pay off that debt.

With four of the five cards featured on this list, if you take full advantage of the intro APR period and pay $200 per month, you’ll pay less than $450 in interest and cut your repayment time in half to 20 months. That’s a significant savings.

For the cards that offered a rewards program, we also estimated how much cash back you might earn over a five year period. CNBC Select teamed up with location intelligence firm Esri. The company’s data development team provided the most up-to-date and comprehensive consumer spending data based on the 2019 Consumer Expenditure Surveys from the Bureau of Labor Statistics. You can read more about their methodology here.

Esri’s data team created a sample annual budget of approximately $22,126 in retail spending. The budget includes six main categories: groceries ($5,174), gas ($2,218), dining out ($3,675), travel ($2,244), utilities ($4,862) and general purchases ($3,953). General purchases include items such as housekeeping supplies, clothing, personal care products, prescription drugs and vitamins, and other vehicle expenses.

CNBC Select used this budget to estimate how much the average consumer would save over the course of a year, two years and five years, assuming they would attempt to maximize their rewards potential by earning all welcome bonuses offered and using the card for all applicable purchases. All rewards total estimations are net the annual fee.

It’s important to note the value of a point or mile varies from card to card and based on how you redeem them. When we calculated the estimated returns, we assumed that cardholders are redeeming points/miles for a typical maximum value of 1 cent per point or mile. (Extreme optimizers might be able to achieve more value.)

When choosing the best balance transfer card, we focused on the card that provides consumers with the cheapest way to pay off their debt rather than the number of rewards they could potentially earn. When you’re in credit card debt, your primary focus should be repayment. Earning rewards should be seen as a bonus, and you don’t want to spend beyond your means in order to earn points.

The five-year rewards total and the interest rate and fees estimates are derived from a budget similar to the average American’s spending and debt. You may earn a higher or lower return depending on your spending habits.

For rates and fees for the Blue Cash Preferred Card, click here

For rates and fees for the Amex Gold Card, click here