Getting ready for family vacations and traveling abroad? Before you hop on that plane, consider these tips on when it’s better to use your debit or credit card for travel. Taking a little time to plan ahead before traveling may help you save lots of money – and headaches!
To start off, we recommend bringing at least three different cards when traveling – two credit cards and one debit card. This practice is helpful in case your primary card is lost, stolen or frozen due to suspected fraud.
Here’s some tips to determine when it is best to use a credit card or debit card when traveling.
Use CREDIT CARDS for:
Hotel and car rentals. When making hotel or car rental reservations, a hold on funds is usually placed on your card. At a hotel, a hold may include the room rate, taxes and possible incidentals. A hold placed on your credit card will not affect the availability of funds in your personal checking account as it would with a debit card.
Added anti-fraud protection. Visa® or MasterCard will reimburse any transactions you didn’t authorize. If the fraud is on your debit card, it could affect the availability of funds for your other prescheduled payments such as rent, mortgage, insurance, etc. Be sure to set up real-time transaction alerts with mobile card controls to stop fraud in its tracks, and be sure to report your lost or stolen card immediately.
Minimizing foreign transaction fees. Visa® and MasterCard add 1 percent fees onto foreign transactions in a foreign currency. Many financial institutions mark up this fee to as high as 3 percent, while some waive it all together. Fees are most often waived on credit cards.
Travel rewards, discounts and perks. Unless you travel frequently, cards with travel rewards may not offer you the best value because of their high annual fees and Annual Percentage Rates (APR). You may find that a cash-back card or one with a lower APR may offer the best fit. Some cards offer additional perks such as rental car insurance, late hotel checkouts, airline lounge access and free or discounted medical travel insurance.
Use DEBIT CARDS for access to cash. Fees are likely to be higher at the ATM if you use a credit card because of the cash advance fees, which can be as high as 5 percent of the transaction. It’s also common that higher Annual Percentage Rates are assessed for cash transactions. Therefore, it’s better to use your debit card at the ATM.
It’s best to notify your financial institution of your travel plans ahead of time to keep your card from temporarily being blocked. For foreign travel, provide every country where you plan to use your card, including layovers, to help ensure your transactions won’t appear suspicious.
To make for a smoother trip, it helps to know which situations are better to use your credit card or debit card when traveling. If you’re ever unsure or have questions about fees, always check with your financial institution before you leave for vacation.