Why You Should Get a Credit Card for Your Summer Vacation
July 9, 2018
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles.
Warm weather is finally here and the vacation you’ve been diligently planning is just a few weeks away. While you’re probably excited for your trip, it’s normal to be stressed out, too.
Not only do you have to deal with the logistics of travel (getting to the airport, checking into a hotel, etc.), but you will likely need to pony up a ton of cash to make it happen. According to last year’s Allianz Travel Insurance Vacation Confidence Index, travelers planned to spend between $1,373 and $2,628 per person on their summer travel plans depending on their age. No matter who you are and how much you have saved in your travel fund, that’s a lot of dough.
4 Reasons to Get a Credit Card for Summer Travel
Whether you have some of your summer travel booked and paid for or you’re waiting to score a last-minute deal, you might be surprised to hear that one tool could help save you money or protect your financial investment. On the flip side, this tool could also cost you significant sums of money if you use it the wrong way.
Yes, we’re talking about credit cards. Used correctly, you can earn rewards and consumer protections that make travel a better deal. If you don’t pay your balance off right away, on the other hand, you could wind up paying interest to the tune of 17% or more and fall into a debt spiral that’s hard to break.
If you have the cash to pay for your trip upfront, a credit card can help you get ahead. Here are four reasons you should consider getting one before you depart on your summer getaway:
Earn cash-back and use it to offset the cost of your trip.
If you’re someone who wants to save money on your upcoming summer vacation, a cash-back card or card that lets you redeem points for statement credits is the way to go. With this strategy, you would sign up for a rewards card before your trip then use it for all your travel-related purchases while you’re gone. Once you return home, you could cash in your rewards for statement credits to reduce the balance you owe.
Imagine you signed up for the Chase Sapphire Preferred® Card. In this scenario, you would use the card for all your travel bookings and expenses. Since this card offers 50,000 points after you sign up and use it for $4,000 in purchases within 3 months from account opening. Plus, 2x points on travel and dining and 2x points on all other purchases. You would earn at least 54,000 points worth $540 in statement credits once you met that spending threshold. That’s a $540 trip discount, which is hard to beat.
Rack up valuable travel rewards to use on another vacation.
Of course, cashing in points for statement credits is often the least lucrative way to redeem points. Instead of cashing in for statement credits, you could also rack up travel rewards for use on another trip.
- Credit Recommended (660-850):
- Rewards Rate
- 2X points on travel and dining
- Intro Rewards Bonus
- 50,000 bonus points
- Foreign Trans Fee
- Annual Fee
- Regular APR
- 17.99% - 24.99% Variable
- Credit Recommended
- Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
- Chase Sapphire Preferred named "Best Credit Card for Flexible Travel Redemption" - Kiplinger's Personal Finance, June 2018
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- No foreign transaction fees
- 1:1 point transfer to leading airline and hotel loyalty programs
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
- No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards
In the same scenario above with the Chase Sapphire Preferred® Card, the 50,000-point signup bonus is worth $625 in travel booked through the Chase Ultimate Rewards travel portal. You could also save up your points for smart transfers to popular travel partners like Southwest, Marriott, IHG Rewards, World of Hyatt, United MileagePlus, and Air France/Flying Blue.
If you transferred your points to Southwest, you would likely have enough miles to book two-round-trip flights within the U.S. or to the Caribbean. If you transferred 50,000 points to Air France/Flying Blue, you could cover a round-trip flight to Europe that’s worth up to $1,500.
Score important consumer protections and travel insurance.
Another reason to pick up a credit card has less to do with rewards and more to do with the perks you receive for being a customer. Many rewards cards offer valuable insurance products for cardholders, and these products can help you save money when things go wrong.
For example, some of the best travel credit cards offer free trip cancellation/interruption insurance, baggage delay insurance, and travel accident insurance. Others offer primary auto rental coverage you can use for free instead of purchasing additional insurance at the rental counter.
Make sure to find out which cards offer these important protections before you sign up.
Credit cards are safer to use for online purchases and travel bookings.
Finally, don’t forget that there are risks that come with using debit to book travel or make purchases online — and that the risks are much less severe (or even nonexistent) when you use a credit card instead.
Imagine you make a purchase online and your debit card number is stolen. According to the Federal Trade Commission (FTC), you’re only on the hook for up to $50 in losses if you report the stolen card within two business days of learning on the theft. If you report the theft more than two days after learning of it but less than 60 business days out, your maximum loss is limited to $500. If you fail to notice the theft or forget and you report the loss more than 60 days after your statement is sent to you, on the other hand, your loss is limited to “all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account,” writes the FTC.
With a credit card, your maximum loss is $50 no matter what due to the passage of the Fair Credit Billing Act (FCBA). Many cards also come with zero liability, meaning you owe nothing if your card is lost or stolen and used without your permission.
Credit cards can help you save or protect your financial investment when you travel, but they’re still not for everyone. If you don’t have the cash to pay for your summer vacation, using a credit card will likely cost you a lot more once you add in interest costs and fees.
Before you sign up for a new card to use on your summer vacation, make sure you’re prepared to use it in a way that will help your finances. Otherwise, you’re setting yourself up for years of debt and monthly payments you will likely regret.