When it’s finally time to take that well-earned vacation, most people focus on where they’re going and not necessarily how they’re paying for it. But your method of payment can have a big impact on how much you enjoy your trip and what your finances look like when you return.
According to a 2022 survey from The Vacationer, over 80% of Americans planned to travel during the summer months, and more than 52% expected to spend over $1,000 on their trips according to Bankrate.com. That’s a significant hit to the average household budget. With numbers like that, it’s important to be strategic about your spending, especially when credit cards are involved.
So, should you rely on plastic when it’s time to relax? Let’s break down the pros and cons of using credit cards while vacationing, and how to best use them.
The Pros of Using Your Credit Card
Travel Rewards & Cashback Perks
One of the biggest benefits to using a credit card while traveling is the ability to earn rewards. Many travel-focused cards offer points, miles, or cashback on common vacation expenses like flights, hotels, rental cars, and dining. If you’re already spending the money, using the right card can help you rack up points for your next trip or reduce your overall travel costs.
Use cards that offer enhanced rewards specifically for travel spending. If you pay off the balance in full, you can maximize these perks without paying interest.
Better Fraud Protection and Security
When traveling in unfamiliar places, the risk of lost or stolen wallets can increase. Credit cards offer more fraud protection than debit cards. If your debit card is compromised, this could result in your hard-earned cash being depleted and it may take several business days to get back after filing a report with the bank.
This makes credit cards ideal for large purchases like hotel stays or tour bookings. You also don’t risk having your checking account wiped out by a fraudulent charge, which can offer serious peace of mind while you’re away from home.
Smoother Hotel and Car Rental Experiences
Credit cards are often the preferred method of payment for hotel and rental car companies. That’s because these businesses tend to place a hold or “authorization” on your card as a security deposit. With a debit card, those funds are temporarily frozen in your checking account, potentially leaving you short on vacation cash.
Using a credit card helps avoid that issue and makes checking in and out a smoother experience.
Financial Flexibility for Emergencies
No one wants to think about emergencies while on vacation, but they happen. Flight delays, missed connections, medical needs, or even having to book an extra night at a hotel can result in unexpected costs. A credit card gives you the financial safety net to handle those unexpected expenses without tapping into savings or stressing about your bank balance.
Foreign Transaction Advantages
If you’re traveling internationally, many travel-focused credit cards offer no foreign transaction fees, which can save you 1–3% on every purchase. They also usually offer competitive exchange rates, making them a smarter choice than exchanging cash at the airport or using currency exchange booths, which often come with hefty fees.
The Cons of Using Your Credit Card
While there are plenty of benefits to using credit while traveling, there are also some risks that can undo all your budgeting progress if you’re not careful.
Overspending is Easier on Credit
Vacations put most of us in a “treat yourself” mindset and with a credit card, it’s easy to swipe first and think later. In fact, a LendingTree survey showed that over 40% of Americans went into debt after a vacation, with credit cards being the most common method of overspending.
The problem isn’t necessarily using the card, it’s not having a repayment plan. Interest charges can build up quickly, especially if you’re only making the minimum payments afterward.
High Interest Rates Can Undo the Perks
Unless you’re using a card with a 0% introductory APR, any balance you carry can quickly accumulate interest, which eats away at the cashback or rewards you may have earned. The average credit card interest rate in the U.S. hovers around 22%, which means that a $1,000 vacation purchase could end up costing a lot more over time.
If you’re planning to use credit, try to pay off the balance as soon as you return or before interest begins accruing.
Hidden Foreign Transaction Fees
Not all cards are built for travel. Some credit cards charge 1% to 3% in foreign transaction fees, which can sneak up on you and inflate your total bill without you realizing it. Check with your bank before you start planning to go away if you’re unsure whether your card charges these fees.
Vendor Limitations & Extra Holds
While most places accept credit cards, some smaller shops, taxis, or remote businesses may prefer cash and can even charge extra for credit card use. Additionally, some businesses (especially hotels and car rental agencies) place large holds that can tie up a big chunk of your available credit.
Carrying a mix of payment methods, including a debit card and some cash, can help you avoid surprises.
Exchange Rate Variability
Even though some credit cards tend to offer competitive exchange rates, they can vary from day to day. That means your purchases abroad might cost a little more (or less) depending on the timing. While it’s usually not a deal-breaker, it’s worth noting if you’re on a strict budget.
Tips for Using Credit Cards Wisely on Vacation
• Set a vacation budget ahead of time and stick to it, even if you’re using a credit card.
• Use a travel rewards card that offers perks like no foreign transaction fees, travel insurance, and cashback.
• Track your spending daily during the trip using your credit card’s mobile app or alerts.
• Pay off the balance ASAP, ideally before your next statement closes.
• Keep a backup method of payment in case of emergencies or technical issues.
If you’re planning to get away soon and looking for a credit card with benefits, Palisades CU offers members the Platinum Rewards Mastercard. Apply today for your travel card of choice with a competitive 1% foreign transaction fee, $0 annual fee, fraud protection, and the ability to earn rewards on travel expenses such as plane tickets, hotel rooms, and rental cars. For more information about our Platinum Rewards Mastercard click here.
Using a credit card while vacationing can be a smart move if you’re strategic about it. The rewards, security, and convenience can make travel smoother and more affordable, but it’s important to avoid the common pitfalls of overspending and interest accumulation. With a clear budget and the right card in hand, you can enjoy your vacation without coming home to financial regret.
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