By Bruce McClary
The June online poll conducted by the NFCC revealed how consumers intend to pay for their summer vacations this year. Among the available choices, the credit card seems to be the one most likely to face the same fate as Kevin from the movie Home Alone. According to the survey responses, people preferred to enjoy vacation with their own cash or debit cards. Sorry credit! It is natural to be concerned about overspending when planning a vacation. While using cash or a debit card is a great way to avoid going into debt, there are some additional considerations that should be made before making them the only options for travel.
Before traveling this summer, here are some points to ponder before packing the debit cards and cash:
While many banks and credit unions have improved security options for debit cards, the fact remains that lost or stolen cards can give thieves access to drain checking and savings accounts quickly. Liability for charges depends on when the card is reported lost or stolen, and can vary depending on the card issuer. For example, maximum cardholder liability for reporting three days after learning about a card loss or theft can be $500. There is also the matter of how long it takes the financial institution to replace the money that was used for unauthorized charges. If vacationing with a debit card, it is best to have fast access to the card issuer’s fraud center and a very secure place to store the card.
Traveling with cash is an even riskier proposition, since the stakes get higher as the amount carried increases. Most would have better luck winning the lottery than recovering stolen cash while far from home. If having cash in hand is necessary, avoid withdrawing large sums at a single time and be conservative about the amount carried when out on the town.
Using a debit card to withdraw cash from an ATM can come at a high premium when traveling. Transactions that are conducted outside of the issuer’s network can be expensive. Although the average transaction fee is over four dollars, these can be higher or lower depending on the location. The best way to avoid these extra charges is to check with the card issuer to see if there are any low or no cost options for withdrawing cash at your destination. They may have an arrangement with other teller machine networks for free and convenient withdrawals. If there are no ways around the ATM fees, cut costs by limiting the number of withdrawals.
Holds and Restrictions
If using a debit card to reserve hotel rooms or refuel the camper van, be aware that there could be a hold placed on the card beyond the amount of the purchase. If the balance of the debit card is not enough to accommodate the hold, it could result in overdraft fees or possible point of sale rejection. There are also problems that may arise when using a debit card to book a rental car, since many companies will only accept credit as a form of payment. Those that do accept a debit card may require customers to authorize a credit check and may also place a hold on the debit card being used.
With these points in mind, it may be worth taking a credit card along for the ride in case there are times when it would be a better payment option. The key to staying out of the red is to pay all charges as soon as possible, and preferably before the end of the current billing cycle. Responsible use of a credit card while traveling can reward users in many ways, with redeemable points for purchases and possibly a few points toward a better credit rating.
The NFCC June poll question and results are as follows:
“I intend to pay for my summer vacation by”
- Paying cash or using a debit card 20%
- Using a credit card, and paying the bill in full immediately 6%
- Using a credit card, and paying the balance over time 7%
- I won’t be taking a summer vacation 67%
Note: The NFCC’s June Financial Literacy Opinion Index was conducted via the homepage of the NFCC website (www.nfcc.org) from June 1-30, 2015, and was answered by 813 individuals.
Bruce McClary is Vice President of Public Relations & External Affairs with the National Foundation for Credit Counseling.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.