Should You Put a Vacation on a Credit Card?
I don’t like debt. But sometimes I love my credit card – especially when it comes to vacation. But only because I know the difference between credit and debt. It’s okay to use the credit card because of many of the advantages they offer, but make sure you don’t just end up burying yourself in debt.
Advantages of Paying for a Vacation with a Credit Card
Now is the time that you want to use your credit card. If you have an airline card or a resort card, see what extra points you can get by using their card. For example, when we book at Sandals Resorts, we use our Sandals credit card and get double resort points. Plus we get the normal credit card points as well. If you don’t have a specific card for airlines or resorts, you will still earn the normal points or miles for your credit card. If it is a particularly expensive family vacation, then those points can be quite rewarding.
When we take expensive vacations, the last thing I want to do is have cash floating around anywhere, or even my debit card number – or a “lost” check. I want to know that if there is any fraudulent purchases, it is not coming directly out of my bank account. If I lose my wallet full of cash – I am out of luck. But a credit card can be cancelled and replaced.
Imagine paying to rent a house at the beach – only to find out the person you sent that money to didn’t even own the house! Or what if the resort promises one thing but delivers something much less. If you cancel and go to a different resort at that moment, they may not refund your deposit. With a credit card you can dispute the charges.
And when you make all of your purchases while on vacation, it is much easier to dispute those charges as well if you were ripped off in any way. Think about it – are you more likely to get overcharged or otherwise ripped off if you are at a destination vacation or in your home town? Some less-than-reputable business owners know that vacationers are not repeat customers and they see transactions as one-and-done so they want to get the most out of you right then and there – not worrying about an ongoing customer relationship.
While every credit card is different, some also offer protection by providing travel insurance including:
- Additional reimbursements for lost luggage (above what the airline provides)
- Trip cancellation insurance
- Trip interruption insurance
You will have to check the fine print to see what your particular credit card covers. This could be a huge benefit. Plus, they may cover insurance on your car rental as well so you don’t have to pay the additional $10 per day for your $30 car.
Tracking Your Spending
For some of us, nothing is more stressful than trying to stay within budget on vacation. That’s why I prefer all-inclusives (see my post: Why I Only Take All-Inclusive Vacations). But if that is not an option, then using your credit card means you get all the protections mentioned above, plus the ability to see where you spent all of your money while you were there. It’s a lot easier than trying to keep receipts or use a budget app when you spend cash. Since vacation is about getting away from the daily grind and remaining as stress free as possible – a credit card actually makes that goal more attainable.
Disadvantage of Using a Credit Card for Vacation
You may spend more than you can afford. Yep, that’s about it. But this is a big one. You can’t just compare four advantages to one disadvantage means advantages win. If you overspend and end up stressing about it while on vacation and then really stressing about for the next six months, then you didn’t really get the relaxation you were hoping for anyway.
If you are already living with a very tight budget and lots of debt, then don’t use a credit card. If you are on a cash diet, then don’t use a credit card. The point is that I can’t tell you what is best for you – I just want to make sure you have all the information available so you can make the right decision for you.
Tips for Using a Credit Card on Vacation
If you are going to use a credit card for vacation, and while you are on vacation, here are a few tips:
- Use the correct credit card to book your flight, hotel, etc.Go for the maximum points here. But keep in mind that a credit card with an existing balance has no grace period, so interest begins on day one.
- Use the credit card, but don’t get into debt. Just because you book the $950 flight on your credit card doesn’t mean you have to be $950 in debt. You should already have the money for the flight in a savings account. Book the flight with your card then use your savings to pay it off. The same goes for the hotel. And if you already have a balance on your card, then pay it down by the amount of your vacation before you make any vacation purchases.
- Budget ahead of time. It is important to estimate how much you will need for vacation. The flight is straightforward. The hotel is easy to estimate. Just remember to add in about 15% extra for all the fees and taxes that get tacked on. It is the food and entertainment (and/or shopping) that really make a difference. Do some research ahead of time and determine a few of the activities you plan to do and set aside a specific amount of money for shopping and dining.
- Have a Vacation Budget Buster Fund. Yes, I just made that up. It’s a fund equal to about 20% of your estimated vacation budget. If you cannot afford 20%, then make it 10% or even 5% if that is what you can scrap together. This is a little cushion in case you overspend a bit (who knew the outlets were so close to the resort?). Or maybe a bad storm comes through and shuts down the airport… for two days… and you need to stay at a hotel or rent a car and drive 10 hours.
- Take two credit cards. In the event of an emergency, a lost card, or a technical glitch, it’s good to have a backup. If you have to buy a ticket to leave early due to an emergency or if you just want to stay an extra day, don’t let a credit card issue be the difference between an inconvenience and a major stressor.
Using these tips should help you avoid the common credit card mistakes such as getting into debt and overspending. Relax and enjoy your next vacation… and then make sure you follow us and tell us about it!