When traveling, the biggest question after “where are we going?”, is often “how are we going to pay for it?”. While paying for your trip with a credit card is the most convenient, if not used properly it can lead to financial strain. If you have the funds saved to pay off your credit card balance at its due date then there is no problem using your credit card to finance your trip. Doing your own research on different travel credit cards can also be helpful when being mindful of your finances.
Downsides of Using Your Credit Card for Your Vacation
Many people get into trouble with financing their vacations on their credit card because paying upfront with credit when you don’t have the money saved could have lasting consequences. Paying with your credit card is the easiest way to pay nowadays, a magical piece of plastic that is swiped or inserted, and you’re good to go! For that reason, expenses can add up that were not budgeted for.
Most credit cards charge interest rates well over 10% to the balance that you carry over. Keeping vacation expenses floating over a few months could result in paying a couple of hundred dollars in interest. The longer it takes to pay off your trip, the more interest charges rack up.
The amount of credit used and credit utilization you have available play a major factor in your credit score. For example, if you have an $8,000 credit limit and have a $4,000 balance, your credit utilization is 50%. The lower your credit utilization, the better. If you use your credit card for a big vacation and the costs use up more than 30% of your available credit, your credit scores could suffer.
Vacation should be relaxing, but if your trip results in credit card debt that you can’t pay off, it can have the opposite effect. When traveling, keep the long-term consequences in mind before using your credit card to pay for a vacation.
Benefits of Using Your Credit Card for Your Vacation
On the other hand, if you have money set aside for the trip, and have been saving for unexpected expenses, you are more than welcome to use your credit card to foot the bill. As long as you immediately pay off the balance.
Some of the benefits of paying with your credit card include the rewards that you can earn. Using a credit card for your upcoming trip can earn you the next one quicker, due to reward points, miles, or cashback. Depending on which credit card you have, these reward points and percentages vary. It is important to do your own research when searching for a travel rewards credit card.
If you find the right credit card, you might also get valuable travel protections, such as lost luggage reimbursement, travel accident insurance, and travel emergency assistance. This type of protection could come in handy if you run into a problem while you’re away from home.
Using a credit card can also be safer than using a debit card or cash while on vacation. It’s less than ideal to lose your wallet while traveling, trust me we’ve all been there! Luckily, with the click of a button most credit cards freeze your assets and are easy to replace without any additional hassle. Most credit card companies also protect you from fraudulent charges.
Using a credit card while traveling is also the most convenient way to pay. It allows you to book your trip and hotel online, an easy way to make your travel arrangements. And once you’ve landed, you don’t need to track down an ATM or a currency exchange office when overseas.
As long as you have saved for your trip and know what you are able to spend, there are many pros to using your credit card, especially if you have a travel rewards card. With our Voyage Credit Card, you pay no annual fees, balance transfer fees, or cash advance fees. You’ll only owe 3% of your balance each month, and you’ll get an annual percentage rate of 8.88%*. Earn reward points and cash them in for different travel rewards found in our uChoose Rewards.