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Are you getting ready to travel?
Not everyone has a huge nest egg they can tap into. If you don’t want to wait until retirement to travel, you need to figure out the concept of putting your trip on credit.
I personally believe you should be living your life now. You don’t know what the future holds and you may not have the capital, time, or motivation to travel later in life. Don’t enter your twilight years wondering what could have been.
This post focuses on putting your trip on credit and doing it right.
Credit Isn’t Bad You’re Just Doing it Wrong
People are told that you should never think about putting your trip on credit. In a lot of cases, people shouldn’t do this because they’re doing it incorrectly.
Did you know that in one study 96% of Americans failed a basic financial literacy quiz? That might not come as a surprise to you. The average person is not financially literate. And who can blame them when there are no specific mandatory classes in schools for it?
See Also: 5 Hacks for Increasing Your Credit Score
Barron Advisors – Know Your Credit Score
When seeking to put any major purchase on credit, you need to know your score.
Barrons put out an excellent guide on how you can find out about every aspect of your credit score. They state that your score is always different depending on whether you want a mortgage, a car loan, or a personal credit line.
They state that you should take the following steps to know where you are:
- Ask for your credit report from your bank.
- Make sure your lender is part of FICO. More than 50 major lenders are.
- Get your VantageScore. It can be found on a variety of websites, which can be found with a quick Google search.
- Check the three major credit reporting companies Equifax, TransUnion, and Experian.
Following these steps should just about cover every aspect of your score. Obviously, if you have a low score and you’re heavily in debt, you know that putting an entire trip on credit is ill-advised.
Use the Right Bank When Putting Your Trip on Credit
You likely already know that you should compare credit cards. This is the right way of looking at it, but you also need to choose the right bank.
As someone from the UK, I wish I could get a Charles Schwab bank account because it’s one of the most powerful accounts in the world for anyone taking a trip. Barrons rightly highlighted Charles Schwab’s dominance over Wall Street for a reason, it’s currently one of the best options on the market today.
They automatically refund all ATM fees from international locations. It might sound like a nice addition, but people don’t understand how powerful that is.
Take Thailand as an example. It’s a common destination for travelers. Yet as a foreigner you will pay around 200 Baht for every ATM withdrawal. That’s around $5 to $7, depending on the exchange rate at the time.
In Thailand, that’s the equivalent of a restaurant meal or more than half the cost of a night in a moderate guesthouse.
So when you think about your bank, don’t just think about credit offers, consider what they do for you when you’re abroad.
If putting your trip on credit, you want to put as little of it on credit as possible. You can do that by making savings elsewhere.
Get Paid for Your Trip on Credit with Points
Points are amazing. They can be used to pay for flights, hotels, and more. So by putting your trip on credit, you can also acquire points to be used for future purchases.
As always, compare different providers.
Barrons has written about different players in the credit card market before. They recently highlighted the partnership between Apple, Goldman Sachs, and Mastercard to bring out an Apple Credit Card.
Apple is a new player to the market, but they’re likely to disrupt the existing market with incredible offers, at least for the first few years. They need to because otherwise why would anyone switch from their existing provider? Integration with the Apple Wallet definitely doesn’t trump great rates.
But make sure you compare the top travel credit cards each year. This changes all the time, so you need to stay on top of things if you’re going to maximize your travel purchases.
How Should Your Trip Influence Your Credit Score?
You likely already know that you should never use more than around 30% of your credit limit on one credit card to avoid seeing a hit on your score.
But there are no penalties for using 30% of your credit limit on multiple cards. This is the sneaky way around it, and why we talked about the importance of knowing your credit score.
A way you might decide to do it can involve putting flights on one card, hotels on another, and general expenses on a third credit card. You maximize your points by using cards that offer more points on specific purchases.
That way you can make big purchases without hurting your credit score.
Barron Advisors – Should You Go Into Debt to Pay for Your Trip?
When we talk about debt, we’re not talking about taking money from a credit card and paying it back in good order. We’re talking about paying for a trip you don’t have the money for right now.
A third of US consumers spend money on credit cards that they don’t have. And that’s driven by nothing but need.
You don’t NEED to take a trip. It’s not the end of the world if you have to put it off for another year.
You should never put a trip on credit when you don’t have the money.
For example, if you want to spend $5,000 on a trip but you won’t get that money for another month from your place of work, that’s fine. Enjoy your trip.
But if you’re spending $5,000 on a trip and you don’t know where the money is going to come from, that’s bad news.
Don’t go into debt for anything except an unexpected emergency.
My Thoughts on Credit and Traveling
Now I live off the grid, so I don’t have the option of taking out credit cards. No lender on the planet would give a credit card to someone without a regular job and a regular address, especially when they know that person is in their home country for about two weeks per year.
It offers me benefits in other ways, but when used correctly credit can be gold. Add in the potential to earn points on your card and in the long-term you can save a lot of money on traveling around the world.
But as Barron Advisors say, you need to do it right or it can destroy your finances.
Last Word – Have You Put Your Vacation on Credit?
Putting your vacation on credit may be scary if you’re doing it for the first time. But with the right cards, the right bank account, and the right planning you can make it work.
And if you spend smart you can earn points that can save you hundreds of dollars on your next vacation.
Have you tried using credit for your vacation before?