After regular travel throughout Europe, it seemed common sense to investigate the best way to manage money while traveling. The problem with travel is that there are so many hidden costs which add to the expense of the travel. For example, toll road charges, restaurants and other expenses can easily add up to being more than you anticipated spending. Believe it or not, this is a time when credit cards should become the traveler’s best friend, though often the opportunity is lost because people don’t understand credit cards don’t necessary equate to debt.
Taking a look at both debit cards and credit cards, you need to understand what a sudden increase in expenses does to the state of your bank account. The bank account will no doubt be the mainstay account where income is placed and regular bills paid. This account needs to stay stable as there are probably standing orders going out every month for utilities, thus keeping home life simple. A sudden surge of expenses to this account, by means of a debit card, could send your financial affairs into a state of chaos.
The debit card takes money directly from your checking account and thus that money is paid straight away. Imagine unexpected expenses being high and it’s apparent that if you used the debit card, the checking account may not be strong enough to take the impact and thus end up going into the red. The trouble with this is that it has a domino effect. If there are no funds within the checking account to meet the regular payments for insurance, electricity, telephone, etc., then one not only loses reputation with the bank, but also loses it with the utility companies who provide comforts that are depended on.
If you choose to use a debit card because you are opposed to credit card debt, then it’s wise to ensure that extra funds are placed within the checking account to allow for the eventuality of spending more than anticipated. This is onerous because you don’t know what those expenses are and can easily make mistakes. It’s also wise to talk to the bank about having an overdraft facility, though do be aware that there will be bank charges on any overdraft that accidentally happens.
The other side of the coin
Often people don’t use credit cards correctly. They amass debt and only pay off a very small amount every month. What they don’t realize is that credit cards can buy time, thus making them the best alternative for use while traveling. An empty credit card account is the best kind of credit card account because each account gives a spending limit. Once that limit is reached, spending cannot be continued as the card will not allow it. Although some cards may just allow a little overspending, going traveling with a card that has no existing debt is the best way to go. The unforeseen expenses of car hire, extra plane fares, etc. can be absorbed by a credit card that has the recognizable symbol of MasterCard or Visa. These are accepted worldwide, whereas your debit card may not be.
Having splashed out while traveling, the consumer can be assured that credit card spending doesn’t impede the flow of money out of their current account. All those utility bills will be paid as normal and the current account does not take the impact of that travel. At the end of the holiday, when you reach home, you are better able to establish how much of that debt can be paid off. If you pay all of that credit card debt at the end of the month in which it was incurred, you will, in effect, have been given free credit since charges are normally applicable after that period. If, however, you want to spread the payment over two months, then you can do this relatively cheaply.
The trick with credit cards is to keep them up-to-date. Use the card, pay the debt quickly and pay little or no interest charges. The longer the debt exists, the more interest will be paid. For the savvy traveler, the credit card is by far the best option to use while away from home for the reasons stated above. Travel often includes expenses that were not budgeted for, and the credit card cushions the effect of spending more than anticipated.
Remember never to travel with credit cards in an obvious place such as in your wallet or purse with the spending money. This is an obvious target for theft. If you lose your money, at least your credit card will get you out of a sticky situation. However, if both money and all credit cards disappear, then problems get larger than life.
The debit card has its place for regular expenses which are anticipated, though while traveling, the credit card takes the impact of unexpected spending. Using both cards for the purpose they were intended for is a wise move, and will keep your banking affairs in order, provided you remember that credit card statements carry the secret to successful use of the credit card. The balance shown is what should be paid to save yourself incurring extra expenses. Read the statement; the interest rates applied to outstanding debt after the month has passed are staggering and often reach as much as 18 to 20 percent of total cost. With correct use of credit cards, you avoid those charges and keep the card in reserve for the next unexpected need. The savvy traveler will know this and certainly use credit cards to their full advantage.