Wednesday, March 23, 2011

Credit cards and travel. Why you need one

Vacation is coming, do I need credit card? Travel without one is almost impossible so I always say yes. Even when using cash, I’m frequently asked for one when checking in at hotels. My only other option has been to let them photocopy my driver’s license (which always makes me uncomfortable.)

The upside is that I may have extra space on my credit card. Travel with a debit card can throw a monkey wrench into your account. These can be a second option but they too have quirks.

For example, a few years ago my family and I vacationed with friends in Washington, D.C.. We didn’t hesitate to whip out our debit card instead of a credit card. Travel wasn’t an every day (or every year) occurrence so we didn’t know to anticipate a problem.

Dinnertime brought an unwelcome shock. The transaction was declined. Calling the bank brought bad news. Funds that we expected to be available were being held by the hotel.

I’d expected our debit card to be authorized for the 2 night stay when we checked in. There hadn’t been a sign so I didn’t expect the hotel to hold two times the amount of our stay to cover “incidentals”.  This is called credit card blocking. Travel spots do it all the time. I didn't know it. My lack of knowledge almost ruined our vacation.

You can bet that my conversation with the hotel manager wasn’t fun. He informed me that most hotels do the same thing. (this was confirmed later) and credited the amount back.  

The temporary damage to our account was already done. It took 7 days for the extra $350 to be credited back. We had a low balance card that we saved for emergencies. This qualified so we used it and paid it off as quickly as we could.

For this reason, I like to tell people that vacation getaways can be less stressful when using a credit card. Travel is geared toward people who use them. It’s a sad and frustrating fact.

Avoiding a credit card for travel can cut out high interest fees on large balances. Debit cards over credit are being used more frequently.

A friend asked for my thoughts about using a prepaid debit card for her upcoming trip. I reminded her that it would be subject to the same travel industry standards as credit cards. Travel for her family could be impacted either way. My suggestion was for her to talk with her family and decide what might work best for them.

For some people, it won’t matter if you use a prepaid debit card or a credit card. Travel with either can be helpful. Not matter which you use, knowing the possible financial impact of either and planning according can help you have a stress free vacation.