Reading an article about American perspectives when it comes to saving (or not) and the use of credit cards got me thinking about the ways in which I’ve financed travel in the past.
Here are some ideas for financing your next trip while remaining financially solvent.
When and How to Use Credit Cards
For convenience sake, most of my booking is always done with a credit card. In addition, I often use a credit card (rather than a debit card that takes money directly out of my checking account) when traveling because it’s easier for me to dispute fraudulent credit card purchases (if this ends up happening) than it is for me to recover lost funds from my bank account. However, allowing a trip to sit on your credit card balance for months can impact your overall financial health. Here are some things to consider when using a credit card to pay for your travel expenses.
Selecting a credit card 
To get the most bang for your travel buck, use a credit card that pays you back either with airline miles or a cashback option. You will still reap the rewards, even if you pay off your full balance each month. When researching credit cards, start with the one offered by the airline you fly most. Check out the percentage rate and perks (for example, Delta’s credit card rewards travelers in miles, discounts and free baggage checking). Be sure to research several options before making your final choice.
Establishing a Budget
If you plan on paying for your entire trip on a credit card, make sure you have set a budget before you start making purchases. When using a credit card, it’s easy to lose track of how much you are spending. A clearly defined budget can help you to avoid an unpleasant surprise when you open your credit card statement at the end of the month. Before you charge your first travel-related expense on your credit card, come up with a specific budget. This may involve some research (on airfare, typical meal costs at your destination, hotel costs, etc.). A good travel budget is comprised of several “sub-budgets” for each area of your travel expenses (airfare, lodging, food, etc.). Once you’ve established this, then you can start making your travel purchases.
Establishing a Payment Plan
Of course, the ideal is to pay off the entire balance of your credit card each month (especially the months when you have racked up a lot of charges during a trip). If this is impossible, establish a clear plan for how and when the balance will be paid (i.e. $500 per month for the next 4 months). To make sure you stick to your plan, set these payments to be made automatically. Even better, you can pay off part of your trip before you even leave (airfare that has been charged on your credit card for in advance, for example).
Tips for Saving
Like I mentioned above, the ideal for your financial health is paying off the entire balance of your credit card as soon as you return from your trip. The only way to be able to do this is to make sure you have the money in the bank before you leave. Remember that budget you established? Add $200 to it and use this amount as your savings goal. Next, establish a specific plan for stocking away this much cash before you leave on your trip. For example, have $100 out of each paycheck automatically deposited into a specific savings account set up for travel. If you put away a little bit each month, it won’t seem like such a big deal when the time comes to pay off your credit card.
