We all look forward to getting away. Whether it’s an annual adventure with the kids or a spontaneous solo city break, venturing to pastures new offers endless possibilities. However, foreign travel rarely comes cheap, and the associated costs are one of the biggest deterrents people face when looking to explore the world. In fact, 28% of travelers cited money as their primary barrier to travel in 2023.
Fortunately, when using a credit card to cover the costs, you don’t have to have access to the full amount upfront. However, this does mean that you may spend longer worrying about paying it back after returning from your trip. So is it a good idea to use a credit card when booking a vacation? In this post, we explore the pros and cons of this approach to help you better understand whether or not it is something you should consider.
Pros
Spread out the cost
If you don’t have the cash to pay for a holiday upfront, putting it on your credit card gives you the option to pay it off gradually over a longer timeframe. This flexibility allows you to save the money gradually, which could enable you to make fewer changes to your lifestyle in the build up to your holiday, potentially giving you more freedom when deciding on the details of the holiday itself.
Purchase protection
Using a credit card can safeguard you against a range of unforeseen issues. Whether you face cancellations, lost luggage, or disputes with vendors, credit card purchase protection acts as a safety net, ensuring you’re not left stranded or financially burdened. This layer of protection can reimburse you for non-refundable bookings and cover the costs associated with lost or damaged items, providing peace of mind in unpredictable situations.
Cons
Interest
Most credit cards offer a set period where customers can benefit from 0% interest. However, when this benefit no longer applies, you will have to take into account the added cost of interest when paying back a lump sum over time. The longer it takes you to pay off your holiday, the more it will end up costing you, with interest being added on top of the total fee each month. This burden can make managing your finances more difficult, and lots of consumers feel uncomfortable about carrying holiday-related debt: in fact, 6 in 10 Americans admitted to feeling this way.
Your credit rating could suffer
When servicing a credit card debt over a number of months, you run the risk of impacting your credit rating. If you make a late payment or miss one altogether, your score will be negatively affected, which could impact your financial wellbeing going forward. You need to be confident that you will be able to afford the monthly repayments when making a large expenditure on your credit card.
Managing your travel expenses
Whether or not it’s the right approach to load your holiday expenses onto your credit card will largely depend on your personal circumstances. If you know you’re going to struggle to pay it back on time, it’s best to avoid taking on the burden of debt, and instead save up until you can afford the holiday. However, if you are able to make repayments on time, not only does it give you more flexibility over holiday bookings, but you could also give your credit rating a boost. Think carefully about your financial situation and you’ll be able to make an informed decision about how to pay for your next trip.
Comments