1. Build your Credit Score
2. Reduce your Current Borrowing / EMI Costs
Going on a trip? Well, you might feel a tad bit uncomfortable when you step out of your comfort zone. You might wonder how to secure yourself financially during travels. Should you use your credit cards or stick to the old way of using cash? Your guiding spirits from mymoneykarma can steer you out of that puzzled state of mind with one quick read. Let's help you decide how you should spend your money while traveling.
Rather than stating the obvious, we would like you to introspect and answer these questions in your mind:
If you have answered these questions with a strong and bold "no," then we believe that you are a responsible spender who knows how to keep expenses within limits. You should consider using your credit cards while traveling. Skeptical, right? Read on to understand its dynamics.
Cash payments barely promise perks or benefits. If you flash money, you could attract unwanted attention. An outsider with cash is an easy target for thieves. If you lose cash, your money is gone. Need I say more?
What's in a credit card apart from some numbers and letters on plastic! It is safer to use credit cards during travel. If you lose it, you can simply block it and get a replacement; you aren't technically losing your hard-earned money. It keeps that tension out of your head. It also brings along several benefits.
Reward points : If you happen to have a Rewards credit card, it can sweep you off your feet with the amazing benefits. Most travel rewards cards offer bonus points for booking flights and hotels. Many of these cards have tie-ups with hotels and you can avail a discount while booking. Apart from that, the more you spend, the more reward points you earn - you can reap their benefits by redeeming them later.
Facilities : Most credit cards offer perks to members. You can't avail a 'book-now-pay-later' hotel booking or those sassy self-drive rental cars without a credit card. Some credit cards provide protection for lost luggage and insurance for your travel. A lot of credit cards give you free airport lounge access to wait for your flight in luxury. A handful of travel credit cards slacken the rules for you when you cancel a booking or change the dates.
Convenience : A sleek and tiny card fits snugly into your wallet than a thick wad of cash. Moreover, what if you are just strolling on the beach and feel an impulse to frolic in the blue ocean? What if you are going to the pool bar? Cash could get soggy, lost or stolen. Credit cards are extremely convenient and safe as you need not bear liabilities if they are stolen.
Remember those three questions that you had answered in your mind? If you had a "yes" for an answer to any of those, you might need to be extra cautious while using credit cards during travel. Remember that these magic cards can be dangerous when misused.
How badly do we want to purchase those much-coveted souvenirs while traveling! Credit cards give access to oodles of available money. Spendthrifts would lose their minds and splurge on shopping. Irresponsible spenders might not only cross their budget limit but also fail to repay the money on time. Payment issues can pull down your credit scores; they can and will bring you a hefty APR, and you could get caught in the notorious debt trap.
However, let's assume that you have planned well and saved up enough for your trip. You will hopefully spend sensibly and have the required money when the due dates arrive.
Oh, there is one more thing that isn't related to your spending habits. In spite of carrying multiple credit cards, you might run into unexpected exigencies. You might visit remote locations where cards aren't accepted. In case you are traveling abroad, you must check whether your card network functions in the destination country. Visa and MasterCards are more or less accepted universally, but there are quite a few other card networks like Discover, Amex, RuPay, etc. that do not work in all countries. Moreover, credit card fraud is in vogue these days. You need to be on your guard while you travel.
While the right credit cards are no doubt your best companions during travel, you might be curious to know about your other options. What if someone doesn't own a credit card? What if someone doesn't qualify for the travel credit cards? What if someone has cards that levy an exorbitant markup fee? What if someone is simply uncomfortable using credit cards?
Well, there are solutions to all these "what ifs." If you don't prefer credit cards, you could try a debit card, a prepaid forex travel card or a traveler's cheque. Let us study these three in detail so that you know which one would work well for you.
Debit cards might seem very convenient during travel as it assures you direct access to your funds. If you are traveling within India, debit cards can be your travel companions. If your card is connected to a widespread network like Visa or MasterCard, your pocket needs would be smoothly met by a debit card.
Debit cards are definitely safer than cash in case of a pickpocket - you can easily get a replacement card and you do not essentially lose any money. A profligate person can control expenditure and stay within the trip budget by keeping limited funds in the account and using a debit card for all transactions.
If you are traveling to an overseas destination, debit cards give you easier access to local currency, but it might not necessarily be cheap. You need to remember that your debit card contains money in INR, but your INRs won't work in the destination country.
If you use a debit card, you will have to pay currency conversion fees, foreign withdrawal charges as well as foreign transaction charges for each transaction. You would end up spending a lot more for no reason. Using debit cards might not be a smart choice for international travel as it isn't an economic proposition. Most importantly, debit cards are not well-protected against frauds.
Prepaid Travel Cards or Forex Cards
Prepaid travel cards and Forex Cards are the safest ones these days. You can load the card with money from your bank account. You can expect better and cheaper conversion rates, fees and charges. They are very convenient for overseas travelers. These cards are easy to get and generally have better exchange rates which do not fluctuate once the money is loaded on to the card.
You can load multiple currencies into them in case you are traveling to more than one country. You needn't pay additional conversion charges when you swipe these for shopping.
Just like debit cards, you can withdraw cash from ATMs using these cards but you might have to pay a nominal charge for withdrawals. You can use these cards like credit cards at merchant outlets and hotels.
However, there isn't any available credit in these cards - this means that you cannot overspend; simultaneously, you might get stuck if you run out of money since these cards cannot give you credit. Replacing a lost prepaid card is easy and hassle-free.
These used to be quite popular earlier as they are secure and easily replaceable. They can be bought in any currency and require a countersignature for use. Unlike our plastic cards, these are plain cheques made of paper and can get damaged very easily. If you are traveling abroad with a traveler's cheque, you will have to visit the bank or the issuing company's office during the working hours to exchange the cheque for foreign currency. Traveler's cheques are also quite expensive to buy as you might have to pay high service charges. Moreover, they have become almost obsolete and might not even be accepted everywhere.
It doesn't require saying - cards are better pocket-companions than cash. However, you should carry some cash for emergencies.
It need not be your primary mode of payment, but it might come to use just in case. Make sure that you have the right cards in your pocket and learn some useful tips to handle credit cards on trips.