Using a Credit Card for Travel – Problems and Risks

Credit cards tend to come in handy for many people on a very regular basis – whether it is earning reward points for just paying for your weekly trip to grocery store on your credit card or having the convenience of using plastic instead of cash when you are traveling. Credit card use while traveling is not always all plain sailing though as you will see.

Problems with Credit Cards and Domestic Travel

For the most part if you are staying within the boundaries of your own country using your credit card while traveling does not present too many problems over using it on a daily basis at home. Their are certain situations though where you may be presented with the choice of using your debit card (to ensure you only spend what you have perhaps) or using your credit card to pay for things when traveling and certain situations do call for one over the other.

When it comes to paying for hotels and car rentals using a credit card over a debit card is almost always the better choice. For example most of the major car rental companies will let you rent a car using your debit card but will often put quite a hefty hold on it for the privilege of doing so. That $29.99 rate for the weekend will often still cost you $100 if you use your debit card and although you will get a lot of that money back when you return the vehicle on time and in good shape it will be days before that money shows back up in your bank account.

In addition almost all credit cards, whether they are specific travel credit cards or not, have car rental insurance of some kind attached to them so that will save you money on purchasing separate car rental insurance from the company itself. The same often holds true for hotels that allow you to book rooms with your debit card instead of a credit card. They too will often put a hold on a larger amount of money than your stay is likely to cost you and again, getting it back will take longer than you would probably like.

Other than these issues if you are traveling domestically and using your credit card to cover some of your expenses the only other pitfall you should watch for is the temptation to overspend just because you have the available credit to do so. Just a few extra expenditures – a second bottle of wine at dinner, those extra stuffed toys at the theme park concession stand – can really add up and you can end up coming home to quite a shock, having gone way over your intended travel budget.

Problems with Credit Cards and Foreign Travel

The real problems with credit card use when traveling can begin when you travel abroad. The first problem that many people encounter is that when they are traveling in certain less urban areas credit cards just simply are not in common use and that can happen more often and in more places than you might imagine.. For example, travel to Ireland and you will find that within the bigger cities your credit card will be welcome almost anywhere, just as it is at home. Go a few miles out into the smaller towns and villages though and it becomes harder to find merchants who accept credit cards at all, even when it comes to paying for lodging. Therefore, when traveling abroad it still helps to take along some travelers checks in many cases.

Another problem with credit card usage and foreign travel are foreign transaction fees. Most credit card issuers charge them and they can add more to the cost of your trip than you might imagine. That uber cute souvenir donkey that cost the equivalent of $45 at the airport gift store? Many credit cards will charge a $1.35 (3%) fee on top of that. Does not sound like too much but that will apply to every purchase you make so within the space of just a few days those 3% (which is an average the foreign transaction fee charged on most credit cards) it can really add up.

If you tend to travel abroad a lot it is well worth looking for a credit card that does not charge these foreign transaction fees. There are not too many of them out there right now but Capital One and Discover both offer a range of credit cards that have $0 in foreign transaction fees attached to them.

ATMs can also present a problem for both credit card and debit card users. Yes it is so much more convenient to simply get cash in the local currency from a hotel ATM but you have to consider that if you make a cash withdrawal on your credit card you will be accessed the advance fee, the ATM fee charged by its owner and the 3% foreign transaction fee.

If you are going to use a credit card abroad it is very convenient, there is little doubt about that but you just have to do do very carefully. Before you embark on your trip get that credit card holder‘s agreement out and go over it with a careful eye so that you know for sure just what extra charges, problems and pitfalls you may encounter by choosing to use your credit card to cover your expenses while traveling.