Nobody wants to spend their hard-earned vacation stressing about every single purchase. But coming home over budget can cause you financial headaches long after the tan lines have faded.
Traveling with large sums of cash isn’t always safe or practical, making the envelope strategy difficult to employ. Using a debit or credit card is the safest, most efficient way to deal with purchases while on vacation. Although a simple swipe of plastic is handy, it can also lead to overspending. Anchor Wealth has several tips to keep you within your budget as you travel. So what type of plastic should you be swiping on your adventures: debit or credit?
Debit vs. Credit
We prefer debit because it makes staying within your vacation budget easier. A debit card has hard limits. You can only spend what you have. With a credit card you can continue swiping long after you’ve exceeded your budget. We are not against the use of credit cards and have many clients and team members who use this form of payment for all of their purchases. There are benefits to using a credit card IF you have the financial discipline to avoid the traps of overspending. If the balance is paid off each month, card rewards can rack up, earning users free hotel stays, airline miles, and cashback. For this reason, credit cards have definite appeal; however, you must be disciplined to pay off the balance each month, ensuring you reap the card’s benefits rather than accrue debt. Unfortunately, there is a reason that over 55 million American households suffer from credit card debt. Staying disciplined and paying off your balance each month is not an easy task, especially when unexpected financial hardships arise.
Debit Card Perks
Factors that were once drawbacks of debit cards are no longer true. Debit cards have evolved significantly in the last decade. As with credit cards, many financial establishments now offer cashback rewards for points earned on debit purchases. Companies such as Capital One will automatically search for available discounts when card users make a purchase. Concerns about debit card security are a thing of the past. Banks now offer the same protections for debit cards as credit. You can also set up purchase notifications to alert you when your card is used. An additional safeguard against fraudulent activity is a daily spending limit, which is set in place by your bank. When on vacation, you can alert your bank to adjust spending limits as needed.
One of the greatest perks of using a debit card is the lack of hidden fees. With a credit card, annual fees, late fees, and interest charges can sneak up on you at the end of each month. When using debit, you always know exactly where your account stands. Once you’ve spent all of the money available on the card, your spending is done. Debit tracking apps make it easy to stay within your budget and keep a close eye on your account balance. Our team often uses a preloaded debit card, such as a Venmo card, while on vacation, guaranteeing you stay within your allotted budget.
When you are on vacation, pile on the sunscreen, not the debt. Anchor Wealth Management is here to ensure you return from your travels renewed and refreshed, not drowning in debt.
By Katie Ludwig, Chris DeSchepper, Adam Ludwig