Use credit cards to your advantage this summer
Going on a summer vacation is supposed to be a stress reducer. But the average American family is likely to spend $2,936 on vacation this summer — including taking on roughly $600 in extra debt, according to a MagnifyMoney survey.
Plenty of us will pull out the credit cards and the excuses to tell ourselves that we’re worth it. But there are some savvy ways to avoid a budget buster this vacation season.
1 CAN YOU RECONSIDER WHEN YOU TRAVEL — AND SEE IF YOU CAN CASH IN ON THOSE REWARDS POINTS? I talked with a friend who told me she simply won’t book a trip in northern Michigan around the Fourth of July because her favorite hotel’s rate during the holiday would destroy her family’s budget. Instead, she picks another weekend.
Such flexibility can be necessary if you’d like to tap into rewards points when booking a hotel room or airline flight.
Some points to consider with those rewards programs: Can you use a combination of points — and some cash — to reduce your out-of-pocket costs for a hotel or plane ticket?
Also, pay attention to any resort fees, cancellation charges or other fees you might be charged, even if you use rewards points.
2 WILL AN EXTRA FEE BOOST TRAVEL COSTS OUTSIDE THE U.S.? If you plan to use your credit card in Canada this summer or even take a trip overseas, take time to find out whether your card has any transaction fees for spending outside the U.S.
“Foreign transaction fees usually range between 2% to 3%, so they can really add up,” said Bill Hardekopf, CEO of LowCards .com.
Both credit cards and debit cards can charge foreign transaction fees on each transaction in U.S. dollars. Some issuers — including Capital One and Discover — do not have foreign transaction fees on their credit cards.
The BankAmericard Travel Rewards card, the Chase Sapphire Preferred card and the Barclaycard JetBlue card — and some other Barclaycards — also do not charge foreign transaction fees.
3 DO YOU HAVE ANY KIND OF TRAVEL INSURANCE ON YOUR CREDIT CARDS? Believe it or not, about 36% of the credit cards analyzed offer protection to cardholders if their luggage is lost, according to research by WalletHub.
The average policy offers coverage of $1,750 for lost luggage, according to Jill Gonzalez, an analyst for WalletHub. Some even offer insurance if your luggage is delayed. Terms vary by issuer.
For lost and delayed luggage, some of the better cards include Chase Sapphire Preferred, Chase JP Morgan Reserve and Citi Prestige Card, according to Wallet Hub.
Some cards also offer reimbursement in the event of canceled trips and travel-related accidents. Again, check with your issuer for the specific terms.
4 CAN YOU TAP INTO A CREDIT CARD DEAL BEFORE YOU GO ON VACATION? Maybe. Some hefty, five-digit bonus offers exist on cards such as the Chase Sapphire Preferred Card, the Barclaycard Arrival Plus World Elite MasterCard and Capital One Venture Rewards, according to WalletHub.com.
But you’re going to need to spend $3,000 to $4,000 on pur- chases in the first three months of opening the account to qualify for many of these deals that can trigger 40,000 or 50,000 in bonus rewards or miles.
The Chase Sapphire Preferred card has no annual fee the first year but a $95 annual fee after that. The Barclaycard Arrival Plus World Elite has an $89 annual fee that is waived the first year. The Capital One Venture Rewards card has no annual fee the first year but a $59 annual fee after that.
To get the best deal, try to opt for travel rewards that you realistically will be able to redeem within 12 to 18 months so there’s no risk of seeing a devaluation of your points, according to Gonzalez.
5 CAN YOU FUEL UP AND GET MORE REWARDS POINTS? Costco Anywhere Visa Cards by Citi offer 4% cash back rewards on up to $7,000 in gas purchases each year and then 1% afterward — which is among the highest rates out there, according to Myles Ma, a reporter and editor for Credit.com.
The card doesn’t have an annual fee. But you do need to be a Costco member, and an individual Costco membership now costs $60 a year, effective June 1.
The Costco Anywhere Visa cards earn points at Costco gas stations, as well as other gas stations. But it’s important to note that a cardholder will only earn 1% cash back, not 4%, for gas purchased at superstores, supermarkets, convenience stores and warehouse clubs other than Costco or for fuel used for non–automobile purposes.
Rewards can be used to buy merchandise or get cash at Costco. If you redeem only a portion of the certificate for merchandise, you will receive the remaining balance in cash at the Costco warehouse register upon checkout.
The card has some travel-related benefits: If certain unforeseen events get in the way of your trip, those with a consumer card may be reimbursed for non-refundable trip expenses provided you paid for your trip with your Citi card.
6 DID YOU PACK A LIST OF PHONE NUMBERS, TOO? It’s not a bad idea to pack the customer service number of your credit card on a separate piece of paper when you travel. Then, if you lose the card, Hardekopf says, you can easily call the toll-free number and stop future transactions.
Write down some other important phone numbers just in case you lose your cellphone, too.
Another tip: Contact your credit and debit card issuer to let them know about a trip. It can avoid having travel purchases on a card blocked while you’re away.
7 WILL YOU TRIGGER OVERDRAFT CHARGES BY USING THAT DEBIT CARD? Take extra care if you plan to use a debit card for some expenses when you travel.
Greg McBride, chief financial analyst for Bankrate.com, noted you could see a hold placed on some money in your account when you use a debit card to pay for a hotel, rent a car or even buy gas on a road trip. If you don’t have extra cash in the account, you might trigger overdraft fees.
A hotel can put a hold on your account to cover the cost of the stay, including an estimated cost for taxes and other charges. The same is true when you buy gas with a debit card.
Many times, you can underestimate how much money will be placed on hold. You might buy $35 worth of gas with that debit card, and it’s possible the station might put a $75 hold on your account for a few days.