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DID YOU KNOW … Is it better to use a debit or a credit card when traveling?

By John Ulzheimer

Now that the holidays are over and we’re all back to work, visions of spring break are dancing through my head. But before you pack your skis or bathing suits, you’re likely going to hit the road for business or other personal travel needs. And when you’re on the road, you’re going to have to choose a method of payment for hotel reservations, rental cars, airfare, and meals. Most of us will choose between credit/charge cards and debit cards.

The Difficulties of Traveling with Debit Cards

Opinions vary when it comes to debit cards. Some people love their built-in budget controls because you can’t spend more than you have in your checking account. Some people don’t care for them because they have less attractive fraud protections and their use does nothing to build your credit. Regardless of where you fall on the debit card likability spectrum, one thing is for certain: they’re not good for business or personal travel expenses.

First, the money that backs your debit card is YOUR money, not a bank’s money. As a result, any debit card fraud will mean that it is your money that has been stolen and is gone.  And while you’re likely to get it back eventually, there is no guarantee that you’re going to get all of your money back in a timely manner. That can mean that funds you think are there are actually not there. The worst place to find this out would be on the road, where you’re depending on the debit card for daily sustenance.

Second, almost all hotel and rental car chains will place a hold on the funds in your debit card account that would otherwise cover your entire trip, plus holding funds for “little things” like excess mileage or incidental hotel room charges. That means that a large percentage of the money in your checking account will be unavailable to cover current and impending charges. If you’re depending on your checking account for auto-payment of various reoccurring charges and your trip results in holds against those funds, your payments will not be made. That can mean the imposition of late fees and the potential of generating negative reports on your credit file.

The Benefits of Traveling with Credit or Charge Cards

Remember, when you use a credit or a charge card, you’re using a bank’s money rather than your own money. In fact, you’re accessing funds from a pre-set credit limit that was established when you applied for and opened the account. And, it’s very likely the credit limit is considerably higher than what you’re going to spend on your trip. For that reason, the holds that are placed on your buying power by your hotel and/or rental car company are usually immaterial to your continued use of your credit card.

Further, if your card is lost or exposed to fraudsters while you’re on your trip, the issuing bank will likely have a new card issued and in your hands in fewer than 24 hours. That means you’re less likely to be out of commission than you would be if your debit card account was compromised. And, the best news of all is that you have no fraud liability if someone steals your credit card number. Any charges that a fraudster would make using your card will not come back to haunt you.

Finally, credit cards are the best tools for building, rebuilding, and maintaining solid credit scores. All credit scoring systems will reward you for properly managing your plastic. Keeping your credit balances low and paying your bills on time is easy and highly valuable techniques to maintain or improve your credit scores.

And if you’re worried about the high-interest rates that often accompany credit card accounts, keep in mind that interest on credit cards is optional. That’s right, optional. If you pay your card’s balance in full each month, then there is no interest charge and your interest rate becomes meaningless. In fact, credit card accounts are pretty much the only credit product where the payment of interest is optional. 

Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of VantageScore Solutions, LLC.

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