If you’ve been bitten by the wanderlust bug, but your bank account doesn’t match your vacation dreams, you may be tempted to finance your adventure with a credit card.
Is it really a good idea to finance a vacation on credit?
The answer isn’t black and white; it depends on several factors.
Let’s look at both sides of this issue, to help you make your decision.
Pro: Reasons to Pull Out the Plastic
Contrary to what you might think at first, there are some good reasons to pay for your vacation with your credit card, such as:
Convenience: There’s no doubt that booking certain aspects of your vacation, including flight, hotel, cruise passes, etc. is nearly always most easily done online, using your credit card.
Not only that, but once you arrive at your destination you can also use your credit card to pay for things like taxis, meals, etc. which can be much more convenient than carrying cash.
The possibility of rewards: When you book your travel on a credit card, there are often rewards or points to be had for doing so.
Sometimes these take the place of cash rebates, frequent-flyer miles, or some other reward structure. This can pay off bigtime if you book a cruise on your card, for example.
If those rewards can be used toward further travel, booking your trip on your card today can also get you one step closer to booking your next trip in the future.
Safety: Safety is always a concern when travelling, and carrying cash does make you a target.
More than that, when you carry cash you run the risk of losing it, too. With a credit card, you can have the card replaced should it go missing.
Peace of mind: When you book travel on your credit card, you may be eligible for certain travel benefits such as insurance or other protections.
Some cards offer travel accident insurance, reimbursement for lost luggage, etc.
These protections alone can make booking your vacation on your credit card a smart idea.
On the con side: Reasons to Think Twice
Hefty interest charges: Remember that the price you pay for your vacation today isn’t what you’ll pay next month and the month after that if you are carrying a credit card balance.
Most cards charge a hefty interest charge, so if you can’t pay off your card when the bill comes in at the end of the month, you could end up paying much more for your vacation than you had planned.
If you can pay off the balance at the end of the month, however, and are using the card only to reap the benefits mentioned above, go for it.
Credit issues: Related to the point above, if you can’t pay off your credit card balance and you end up defaulting, your credit will take a hit.
Damaged credit will affect many areas of your life, from your ability to get a mortgage to your ability to buy a car.
Even if you don’t default on your payments, carrying heavy debt ratio can affect your eligibility for future loans, mortgages, etc.
Be sure to check your credit score before you apply to see where you stand and if you have a decent chance of being approved.
Worry: If you will spend your vacation worrying about how you are going to pay off your card when you get home, it’s probably not worth it.
However, as mentioned, if you have a plan and the means to pay off the vacation quickly and without carrying a high credit card balance for a long time, there’s no real worry to booking your vacation on your credit card.
Summary & Conclusion
Which answer is right for you depends on your spending habits, discipline, and the benefits you are potentially gaining by booking your travel with your credit card.
Above anything else, it’s most important that you are honest with yourself and that you don’t take a “travel today, worry tomorrow” attitude, which can land you in some trouble.