A lot of readers email in and ask me how I pay for travel. A frequent question that comes up is how I often I use credit cards to finance my travel.
I don’t lie: I funded my first two overseas trips almost entirely using credit cards. Although I had a fair amount of cash set aside for each of the trips I took to Europe in the summers of 2005 and 2007, I wouldn’t have been able to afford traveling abroad at the time if I hadn’t charged certain items to a credit card.
The extent to which I’ve used credit cards to fund subsequent travel has varied, depending on the particulars of my financial situation but in each case, I pay my balance off within a few months at most. If you can also commit to paying your balances off quickly, don’t stress about using credit cards to aid you in financing travel.
Book Travel Instantly
The first advantage of using credit cards to pay for travel is that doing so allows you to book instantly. I often stress that setting a departure date is the first step to meeting your travel goals, and it’s difficult to set a departure date if you haven’t booked a ticket.
When I decided to teach English in CHina, it was after nearly a year of unemployment, during which government insurance only barely paid my bills — I was broke. I had no choice but to charge my plane ticket (for which my company would partially reimburse me), my starting work wardrobe and the first couple months of my living expenses in Shanghai.
If I hadn’t given in and used a credit card at that time, I might never have moved to China and developed a location-independent source of income.
Keep Your Cash Free
One reason I use credit cards for large expenses, even now that I usually have cash to cover all my travel expenses, is that doing so keeps your cash free. Far fewer merchants in foreign countries accept credit cards for payment than the ones here in the United States, so it’s important to keep as much cash as possible in the bank, so that you have easy access to it in the event of an emergency.
When I traveled to Thailand in November 2010 to participate in the Tourism Authority of Thailand’s Medical Blog Contest, it was supposed to be an all-expenses-paid trip, since I’d be using my blogging talents to promote the country’s medical tourism industry. Unfortunately, my crappy netbook KO’d less than an hour before I was to begin my live coverage and I had to shell out $800 for the first laptop I could find in sex tourism capital Pattaya.
I had initially planned to pay the contest organizers, who purchased the laptop on my behalf, using a credit card via PayPal. My PayPal transaction got blocked due to suspect fraud, however, so I had to get cash out of an ATM and pay that way. Thankfully, I had enough cash on hand!
Use Debt As A Motivator
Since I hadn’t begun freelance writing when I took the two trips to Europe I mentioned earlier in the article, I had to quit my job before I went on each of the trips, then scramble to find another one as soon as I returned. I took both of these trips prior to housing crisis of 2008, so finding a new job wasn’t quite as hard as it might be now.
Carrying a credit card balance drives me crazy, so although the excitement of each trip was gone the moment I passed back through U.S. customs, the stress of having a large amount of debt motivated me to work hard, pay it all off and eventually begin saving for future travel.
Debt can motivate you in both the short term and the long term. In fact, I would say that the hassle of having to charge travel to credit cards, pay it off, rinse and repeat was part of what motivated me to cultivate the location-independent sources of income that currently pay my bills.
When To Avoid Credit Cards
Credit cards can be extremely helpful when planning and paying for travel, but what about using credit cards during travel? As I mentioned earlier, credit card acceptance is generally much less common abroad than it here in the U.S., but that isn’t the only reason I tend to avoid using credit cards abroad.
Fees are the first. Although some foreign banks allow you to use your U.S. ATM card fee-free, you must always pay a 3% transaction fee to use your credit cards for purchases abroad. This fee is doubled if you use your credit card for a cash advance transaction, either from an ATM (if your bank has assigned your credit card a PIN) or via cash advance at a bank or money changer. Fees are the reason I ended up simply getting cash when I had to buy that new laptop in Thailand.
Another reason I tend not to use credit cards during travel is that I try and minimize the percentage of my trip I finance using credit cards. I mentioned above that debt can motivate you, but I don’t think motivation is proportionate to the amount of debt you incur. I wouldn’t finance a year-long RTW trip using a credit card, for example, or you’ll be spending a year in misery paying your debt off.
Additionally, part of how I rationalize using credit cards to pay for plane tickets, hotels and other items I book in advance is that, as I mentioned above, I’m trying to keep my cash free for use. If I choose not to use my cash during travel, it invalidates my decision to have used credit cards in the first place.
And what about rewards? Well, since most airline credit cards award miles to the tune of 1 mile = $1, you shouldn’t stress too much about using them unless you spend tens of thousands of dollars per year, keeping in mind that the average domestic, round-trip ticket costs 25,000 miles.
The Bottom Line
Use credit cards so that you can get bookings out of the way when you don’t have cash laying around and to make sure you have plenty of cash while you’re on the road, but pay balances off quickly after you return from your trip. More importantly, keep the percentage of travel you fund using credit cards as low as possible.
Ultimately, if and to what extent you use credit cards to pay for travel is up to you. If you follow the general guidelines I present here, however, you will be able to successfully finance your travels over time without a lot of stress.
Robert Schrader is a travel writer and photographer who’s been roaming the world independently since 2005, writing for publications such as “CNNGo” and “Shanghaiist” along the way. His blog, Leave Your Daily Hell, provides a mix of travel advice, destination guides and personal essays covering the more esoteric aspects of life as a traveler.
