Why do you need one?
Of course, this should be your first question to me. You have been saving for your travels for ages and are sitting on quite a nice little nest egg to get you through your trip. But there is one thing (in my opinion) that can always trip up your budget and make you completely lose track of how much money you have - HOTEL DEPOSITS. It's so easy to forget about, but depending on the nature of your holiday, they are something that can make a massive difference. When you check into a hotel/motel/hostel they often need to 'hold' a certain amount of money - usually a couple of hundred dollars - as a bond or deposit, which gets released when you check out.
When you put this charge on a credit card the hotel does just that - the funds get held and then when you check out they are immediately released. When you use a debit card the funds will still be held, but when they are released it can take 7-10 business days for the money to come back into your account (and up to 35 business days in a horrific worst case scenario that we had). If you're checking into a different accommodation every few days and using a debit card for the bond, this could easily rack up to hundreds if not thousands of dollars being held up in limbo that you can't use and need to keep track of. I don't know about you, but I don't really have that money to spare in limbo for a couple of weeks.
Additionally, most rental car companies will not accept a debit card and only take credit cards for bonds or even just to have on file. Giving them your credit card just acts as security (you know, just in case you decide to take off and not return the car). If you find a company who does accept your debit card, you will find yourself in a similar situation to the hotels - the whole amount of the bond will be taken from you and then will take several days to come back to you. For rental cars this is often thousands of dollars with a debit card to cover the excess in the case of an accident.
If you have a difficult time sticking to a budget or controlling your spending, a credit card might not be a good idea. Credit cards have some of the highest interest rates ever, often upwards of 18-20%. If you do not pay your bill in full by the time it's due you could easily start wasting hundreds of dollars in interest, and what was originally a $900 bill can turn into a $3000 bill in a matter of months. If you don't have the money saved to pay the bill by the due date it's just not worth it. I avoid paying interest at all costs, it's just not worth giving money away like that.
Many credit cards these days offer some kinds of rewards program. It's a great idea to choose a card that will benefit you in some way. For example, we signed up to a credit card that were offering a huge amount of frequent flyer points upon signing up if you spent a certain amount of money within the first three months. This was a HUGE benefit to us. In the lead up to our wedding, we were already going to spend the required amount of money within the time frame, which means we weren't going to be putting ourselves into unnecessary debt we hadn't budgeted for, so we just paid some extra things on our credit card and then transferred our money straight over from savings. Great way to top up your frequent flyer points and potentially get yourself some free flights! You can also find similar programs around for Velocity Miles or even just general rewards points with the bank which you can then redeem at their online store for all sorts of things.
I know we all normally just rush through the terms and conditions when we're signing up to things, but with credit cards it's important to read them all and take note of what they are saying. Make sure you compare the difference in annual credit card fees, whether or not you can have a secondary card holder, how many points you will accumulate per dollar spent, what type of cards are on offer (Visa, MasterCard or American Express) and if there are any other hidden rules and requirements attached to the card. A great website to do this is finder.com.au - which compares all the different credit cards on offer as well as comparing every single detail that you might need to know.
As I mentioned before, the number one reason we chose to gt a credit card was to use for hotel and rental car deposits, as we didn't want to be up to a couple of thousand dollars out of pocket by putting these charges on our debit cards. Over time though, and since we moved into our own house, the way we used our credit cards has definitely changed, but one thing always remains the same. We NEVER spend more than we can afford and we ALWAYS pay the bill before it is due so that we don't accumulate any interest. If you stick to doing that, you won't find yourself in the black hole of credit interest that many people do. One other important thing to remember is to spend on your credit card as if it was your debit card. If those shoes or that flight would be too expensive for your savings and you couldn't justify paying for it, you shouldn't put it on your credit card. Be responsible and careful about what you're paying for on your card.
At the end of the day, having a credit card can be as helpful or detrimental as you make it. As long as you keep on top of it and use it responsibly it can be a great relief to have a credit card with you on your travels, especially in the case of emergencies!
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Thanks for the tips! I usually avoid using credit cards on vacations. Love your pictures, they are all so vibrant!ReplyDelete
Great information and what a unique idea for a blog post. I would not have thought of it. Your photography is over the top good!!ReplyDelete
Beautiful photography. In the US we have credit cards that also offer great travel miles and bonuses with low fees. It's a great way to earn back on travel expenses.ReplyDelete
I always make sure i have 2 kinds of card on my wallet and some cash before i go to travel. Such a unique article and i love it.ReplyDelete
Ah credit cards! Such a dangerous trap they are because they really do come in handy. It helps to know that you can't rent a car without an actual credit card. Really good tips you have here - especially regarding the hold deposits you need to be aware of.ReplyDelete
Great tips on when, where and why we might need one. Travel miles are an incentive to use one for me!ReplyDelete
Really very true! Great tips for everyone as credit cards are the most popular way of spending nowadays! Good topic for your blog!ReplyDelete
Great tips right there! Im struggling with my credit card because im bad at managing my finances. Ill be sure to keep this in mind when i get a new one (strictly for flights)ReplyDelete
Great advice with the credit cards. We've managed to get a free flight to use by next year with the air miles on our credit card. When travelling abroad, we tend to use a credit card with no transaction or commission fee. Having a credit card helps in those situations. :)ReplyDelete
This is a great article with really good tips. I never travel without a credit card even if I don't use it. I always have a fear of not having a backup source to pay for something if I need to.ReplyDelete
That you for sharing all these tips very useful an area I will look into more. I lawyers take my CC with me emergency shopping lol. I have some rewards with mine but the tips you have given I'll look into more.. Thanks for sharingReplyDelete
Thank you so much for the credit card tips. I generally am unsure about my expenses so i avoid using credit cards at all. However, as you said credit cards are good if they are well researched and have some reward points on offer is a super option. I think next time i go for a credit card, i'll go through you post and only then, make an 'informed decision'. Thanks a zillion for this post. (Ambuj Saxena)ReplyDelete
This is a great article with really good tips.ReplyDelete
I don't have a credit card and I sometimes use my debit card when traveling. Basing on the tips you have given I might consider owning one.ReplyDelete