You have been waiting months for that beach vacation, and now that it’s finally here, you are free to put everything else out of sight and out of mind for a week. If there’s no greater elation than escaping to a vacation destination, then there’s no greater depression than getting back to find its expenses on the credit card bill.
Paying the price for a great getaway is worth it, but don’t make it worth more than it has to be. How you pay for a vacation could have significant impact to the final bill and the ease of paying it off. Some have suggested that debit cards are the best way to ensure that vacation expenses don’t become a credit card balance, but others have noted the complications of unexpectedly going broke mid-vacation with debit.
When to Face the Payments
Debit card advocates remind readers of the post-vacation depression of seeing a credit card statement to greet them back home. Carrying a nagging balance with interest for months afterwards certainly outweighs that one week of happiness away from home, so there is good reason for not racking up vacation debt.
Many vacationers like to be free from thinking about the world while they relax, but this attitude coupled with the ability to “keep putting it on the card” is dangerous. Some expenses may be unavoidable, but others are short-lived indulgences that will create a nasty credit card balance with interest later. If credit cards make these too tempting, using a debit card is a good idea.
To avoid getting carried away, it is best to use credit cards on a vacation with a budget in mind. Create the budget ahead of time with “emergencies,” “surprise expenses,” and “added indulgences” categories to stay away from interest or at least anticipate exactly how much will be added to a balance.
You may have to save longer in order to have enough in the bank account to use a debit card through the entire trip, but it may be worth it when you are able to look back on the vacation without regret a month later. Long term peace of mind is worth more than a temporary escape.
Reaching Your Limit
If coming back home to a shortage of funds is a rude awakening, then an even worse wake-up to reality is running out of funds in the middle of the trip! It is common sense to have enough money or available credit for a vacation before going on it.
The problem is that bank accounts tend to hover closer to zero more than credit limits tend to reach the maximum. Even if your bank account has enough room to swallow a vacation, give the debit card some extra space for emergencies and surprise expenses like the $100 parking fiasco or a run-in with thieves. It may seem responsible to put it all on a debit card in order to have it paid ahead of time, but even the most responsible vacation planner will run into expenses beyond his control.
Debit Card Holds
No matter the destination, I suspect there are many vacationers who want to get away without getting a huge bill. Though they are in the middle of countless ways to throw away cash, they simply want to make theirs go the farthest.
You may want to hang out at a nice hotel pool without charging $150 a night for extravagant hotel room service, but that choice becomes more complicated with a debit card. Because the hotel does not have a credit card company as a guarantee when you use a debit card, they will sometimes hold as much as 120% of the room charge per night on a debit card.
The money on hold will be active in your account after your stay at the hotel (but not guaranteed right away), but until then that money is unavailable. There is no difference in over-drawing an account because of actual expenses or because of money on hold. Overdraft fees and an inability to use your only card could paralyze your vacation and end its enjoyment.
Analyzing Perks and Safety Features
Having a credit card company as a middle man will also come in handy when dealing with a lost or stolen card. It is much easier to cancel a credit card and dispute fraudulent charges than have the money permanently gone from a bank account.
Furthermore, many credit cards offer increased rewards for hotel, dining, and airline purchases. With the right card, 5% back in rewards is not out of the question. If the enjoyment of a vacation is in not having to think about the world you’re escaping, you won’t need to be thinking about these credit card rewards in order to receive them from the hotels and airline tickets you need. That’s certainly a twist on the gloomy vacation blues that are normally part of getting back home. Knowing that you are receiving increased rewards may even add a layer of fun to the trip if you are able to stay away from creating a balance.
The best perk a debit card offers is lower ATM fees. Thankfully, our group had debit cards available to make our money withdrawal less painful than it might have been.
Vacations may have other considerations such as foreign transaction fees that come with international travel. A consideration might be putting a vacation on a credit card with 0% introductory APR with the intent to pay it off during that period. These are added layers to the debate, but travelers should at least have a foundation of the right credit and debit expectations for a successful vacation.
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