Using credit cards effectively while traveling
As the holidays approach, many people hit the road for vacations. Whether you are planning a cross-country road trip or are flying to foreign lands, using a credit card can make paying for your travel expenses a lot easier than if you used cash. But if the possibility of going over budget has you cringing, remember the benefits of using a credit card for travel and put a spending strategy in place before you leave.
Hotel and Airfare Reservations
Benefit - Reservations are easier with credit cards: Generally speaking, when you make a reservation for a hotel or plane ticket, you are asked to provide a credit card number. Even if you plan to pay cash when you arrive at a hotel, a credit card is usually required to hold your room. Once you arrive at your destination, however, you can pay with cash (although you may be asked to pay the full amount when you sign in). You can also pay for plane tickets with cash at the airport, but you may be subjected to additional security checks.
Strategy - Use a travel agent: A travel agent can book all your reservations for you so that you can pay (credit or cash) for the bulk of your trip at once, ensuring you stay within your budget.
Credit Card Use Abroad
Benefit - Currency conversion is easier with credit cards: Eliminating the problem of converting cash into foreign currencies is another reason credit cards can be very useful when traveling abroad. But there are fees associated with this service, so it is important to find out what type of currency conversion or transaction fees are involved with your credit card. Make sure your credit card is accepted at a variety of businesses in the country you plan to visit.
Strategy - Use a credit card specifically designed for foreign travel: That way you can avoid many of the currency conversion and transaction fees that banks naturally assess.
Cash and Crime
Benefit - Protection against theft: It's awful to be on vacation and realize that your wallet has been stolen. But if you are mainly using cash for your trip, there is virtually no way to recover those funds. Considering that travelers are often easy targets for crime, credit cards are a valuable tool to protect your vacation plans.
Strategy - Take photocopies of your identification and credit cards: Give your trip itinerary and the photocopies of any credit cards you plan to carry to a trusted family member or friend at home in case your wallet is stolen. Pack the 800 or international numbers for all of your credit card companies so you can reach a representative as quickly as possible.
Prepaid Credit Cards
Benefit - Sticking to a vacation budget is easier with a prepaid card: It is important not to spend more than you can realistically pay off when the bills come. However, if you are already paying on credit card debt and are not willing or are unable to use credit cards for travel, purchasing a prepaid credit card may be an option that allows you to enjoy the protections of a credit card without taking on additional debt.
Strategy - Shop for a prepaid credit card well in advance: Using a prepaid credit card can also be a great alternative to carrying cash because your credit report is not required since you are actually depositing money into an account. Your credit card use is limited only by what is available in the account. But make sure you understand all the credit card terms, including the types of fees involved.
There are a lot of reasons to use a credit card on vacation, but keep in mind that it always makes sense to carry a certain amount of cash for expenses such as tips, taxi rides, or meals in places that don't accept credit cards.
Published 11/01/12 (Modified 11/26/12)