Can I Use My Credit Card to Pay for My Vacation?

Just the other day, we had a client who was planning a vacation in Europe with his family. He didn’t want to carry too much cash around with him in a foreign place and was planning to put most of his travel-related expenses on his credit card. However, he was confused because a friend had advised him to stay away from cards stating that they would likely land him in debt.

Perhaps this is a dilemma that you have faced at some time or the other as well – should you put a huge expense, such as an entire vacation, on your credit card? Most experts warn against this practice; and, in a way, they are correct. If you are among those who carry a balance on their cards, such an act could land you into trouble. Credit cards make it very easy to spend more than you can afford to repay.  Handing a waiter a piece of plastic for an expensive meal is a vastly different experience from plunking down a pile of ten dollar bills. And if you are not able to pay back in full and on time, you may end up incurring steep interest charges and late fees that could result in a mountain of debt.

Nevertheless, if you use the instrument responsibly, it can turn into a financial tool that not only saves you money but also provides plenty of convenience. Given below are a few arguments as to why it can be beneficial to use credit cards while on vacation.

Credit cards are easier to carry around than cash. Moreover, if you lose your money or it gets stolen in a foreign country, there’s not much that anyone can do. Also, there are cases where travelers encounter dishonest merchants and vendors. If they transact with them in cash, there’s no way to recover the money later.

If you lose a credit card, it’s merely an inconvenience, not a financial travesty. In case of fraudulent charges or if your card is lost or stolen, your credit card company will not hold you liable. You also get protection on any amount that you spend through your credit card. If you were duped by a dishonest merchant, you can always dispute the charge and most likely get it removed from your account.

Credit cards also help you save money on travel.  Many cards come with benefits such as travel miles, travel insurance, discounts on hotels, car rentals and vacation packages, free upgrades, lounge access and cash back. In these cases, cards may, in fact, prove to be far more beneficial for travel than cash. 

Still, don’t kid yourself.  If you have a 2% cash back card and you plop down a grand on some extravagance, you did not just make $40!  Rather, you spent $960. If you had to count out 48 twenty dollar bills, would you have made the same purchase?

To make sure that you truly benefit from credit cards while away, set a budget and never swipe your card for more than you can afford to pay. Save up for your vacation beforehand and then use the amount to pay off your travel bills. It is easy to get tempted by the reward points that you stand to earn; however, if you can’t pay back the amount, you’ll lose more than you’ll gain.

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