Trips With Tykes has partnered with CardRatings for our coverage of credit card products. Trips With Tykes and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
In some circles, credit cards are a dirty word. I’ve listened to Dave Ramsey for many years and follow plenty of his financial advice so I understand some of the argument. Credit cards get a lot of Americans in real financial trouble. But they are very much an important and almost necessary part of living in the 21st century, especially for anyone who travels.
If you have the means to travel – even a little bit – it’s so important to have at least one credit card (and ideally, the right credit card!). Using debit cards or cash for certain kinds of transactions add risks and frustrations all their own. Using them exclusively can leave you in a bind far from home or can put you in a situation where you lose a significant amount of money.
If you are a reader already familiar with the world of miles and points, I know I’m preaching to the choir. This article really isn’t for you. But I know many Trips With Tykes readers are still unfamiliar with why credit cards are important for travel. Many use debit cards a lot instead. Others have a credit card, but perhaps it’s one that they don’t realize doesn’t give them the right protections and benefits. So I hope to reach those of you who fall into the latter camps!
Here are seven reasons why travelers really do need a credit card. I’ve included plenty of tips for using the cards responsibly along the way and finding the cards that give you the most bang for your buck. No card mentioned in this article has an annual fee of more than $100 to make this accessible to regular folks.
7 Reasons You Need a Credit Card if you Travel
1. Fraud Protection & Security
The most important reason that travelers need a credit card or two in their wallets is to protect them from fraud and provide security for their financial accounts. It’s so easy for thieves to lift card numbers these days. If someone gets ahold of your credit card number and makes fraudulent charges, however, you aren’t responsible. Over the years, I’ve had several credit card accounts compromised, and the banks handled it seamlessly at no cost or inconvenience to me.
The same cannot be said of cash or debit cards. Cash can so easily be lost or pickpocketed when you travel. But debit cards are a serious risk as well. If your debit card is compromised, your bank may not protect you the way that banks do with credit cards. Thieves can drain your account of real money that you can’t get back.
At the very least, even if your bank does cover the fraud, your checking account can be in limbo for days or weeks at a time while the problem is sorted out. For most of us, this account has money we need to pay other bills, so it can really wreak havoc on your entire financial life. That’s the last thing you need to deal with on vacation.
2. An Increasing Number of Places Only Take Plastic
The old saying that cash is king just isn’t true in the 21st century. There are so many places where you simply need to have plastic to purchase certain goods or services. This is even more true for travelers in unfamiliar destinations. Here are just a few places that travelers might experience needing a card to make necessary purchases:
- For hotel stays
- To rent a car
- To purchase train or transit tickets (some stations only have self-service machines)
- Cashless restaurants (yes, they exist and the number of them is increasing)
- To use travel apps like Uber & Lyft
Well, you can just use a debit card you say? Not necessarily. Some merchants put all sorts of additional restrictions on would-be customers who want to use debit cards. Rental car companies, for example, often require debit card customers to have multiple forms of ID and undergo a credit check before leaving the lot with a car. Who has time for that? And of course, the more places you use that debit card, the more you expose it to the fraud risks already discussed.
3. Hotel & Rental Card Holds
Another practical reason that travelers need credit cards is because of the policy of many travel-related business to put temporary holds on cards. When you check into a hotel, for example, many will hold an additional amount of $100, $200, or more on your card to cover incidentals or damage to the room. Rental car companies – if they’ll even rent to you at all with just a debit card – will also place a hold of several hundred dollars on whatever card you present.
If you use a credit card with a monthly credit limit in excess of what you ever spend on the card, these temporary holds are basically not noticeable to you. But if you use a debit card, a hold like this can really matter. These holds can sometimes remain on your card for up to 30 days after your travel is over, significantly tying up real cash in your checking account when you may need it for other purposes.
One example to demonstrate the risk – Walt Disney World implemented a new card hold policy for hotel guests who use their MagicBands to charge purchases to their hotel rooms. Depending on how much you charge to your room and how often, it’s entirely possible to end up with $1000 or more of holds on whatever credit or debit card you use.
Many of these holds can take days or weeks to disappear even well after the actual charges also post. Not too many of us have that kind of extra money lying around in a checking account for an extended period of time. For that reason, I’d never recommend putting down a debit card at a Walt Disney World hotel. But the principle applies more broadly at a lot of other destinations as well. You just never know how the merchant is going to act, and that puts your money at risk.
4. Travel Rewards
If you travel even a few times a year and are putting all your spending on debit cards or using cash, you are missing out on very lucrative travel rewards that can save you money on your next vacation. So many credit cards – even those with no annual fee – come with signup bonuses and points or cash-back for the spending you are already doing. My family personally earns many thousands of dollars in travel rewards from our credit cards every year (even after accounting for the cards with annual fees that we pay).
I know the Dave Ramsey counterargument: people who use plastic spend more than people with cash, statistically speaking. Don’t be a statistic. If you really feel you are going to spend more with credit cards, use them only for major purchases like plane tickets or a hotel stay that you can’t use cash for anyway. Then pay the credit card balance off immediately from your checking account. This way, the card effectively works for you like a debit card does but you also double dip on the miles or points in the process. And if you regularly have any sort of reimbursable business expenses, by all means put those on a card and earn rewards for someone else’s spending.
If you are interested in getting a credit card to earn travel rewards, be sure to check out my list of the 5 best rewards credit cards for family travelers. My absolute favorite card for beginners and intermediates at the moment is the Chase Sapphire Preferred Card. The card earns Chase Ultimate Rewards points that have a multitude of flexible uses. You can redeem them for travel at a fixed value in the Chase portal or you can transfer them to a number of loyalty programs you may already have: Hyatt, United, Marriott, or Southwest to name a few. Travel and dining purchases earn double points. The card currently has a 60,000 point signup bonus for completing $4000 in spend in the first three months and a $95 annual fee.
5. Trip Interruption & Cancellation Protections
So many travelers don’t know about the many fringe benefits that credit cards can provide that they miss out on by spending cash or using debit cards. One of the most common benefits is some form of trip protection. The scope of these benefits varies quite a bit, but generally speaking, look out for the following:
- Trip Delay Insurance: Protects against costs incurred on delays of many hours (or overnight) – like when you have food, clothing, or hotel costs due to a significant flight delay.
- Trip Cancellation Insurance: When you need to cancel a trip beforehand due to a covered reason (illness, death, etc. – usually applies to people booked on the trip and immediate family members).
- Trip Interruption Insurance: When your trip is already underway but is derailed by a covered reason.
I see often in my Disneyland with Kids Facebook group parents who experience a child coming down with an illness on a Disney trip. Their pre-purchased park tickets go to waste in the days that follow as they are confined to their hotel room with a sick kid or need to take their child to an urgent care clinic or ER. If you put your park tickets on a credit card with the right protections, however, getting some or all of your money back is very possible.
To be sure, the cards that offer these benefits are often the more premium credit cards with annual fees. So it’s very important to do the math. I personally make sure all my credit cards “pay for themselves” in terms of their other benefits before I keep them, so the trip insurance aspects of cards I have are an additional free bonus.
There are nevertheless a few cards that offer some or all of these benefits with reasonable annual fees. A few that I’d recommend are (always read the fine print for the particular card for which you are applying to learn the scope of the coverage):
6. Rental Car Coverage
If you rent cars in your travels, a credit card is so important for a multitude of reasons. We’ve already touched on the fact that some rental car companies won’t even rent a car to you without a card and the fact that many rental car companies put large holds on all cards.
One additional benefit of having a credit card for rental cars is that many cards also offer rental car collision coverage. Yes, you can purchase the very expensive insurance from the rental car company. Or your own insurance will usually cover you if you don’t. But dealing with the hassle of your own insurance company and the rental car company together can be a time consuming process if you ever have an accident in a rental car or have a rental car stolen. And who needs the increase in their insurance rates back home because of an unfortunate incident when traveling?
You want to look for a card that offers primary rental car coverage so you never have to make a claim with your own insurance first. A few personal cards that offer primary rental car coverage and that have annual fees under $100 include:
7. Foreign Transaction Fees
Not everyone travels internationally, but if you do, you absolutely need a credit card. And you need one that offers no foreign transaction fees. There’s simply no reason to pay an additional 2-3% on everything you buy while traveling abroad.
Luckily, a lot of credit cards now offer this benefit. A few personal cards that do not charge foreign transaction fees that have low annual fees:
- Chase Sapphire Preferred Card
- Capital One Venture Rewards Credit Card (Compare this card to other travel rewards cards)
- Southwest Rapid Rewards Priority Credit Card
- United Explorer Card
The Bottom Line
If you don’t yet have a credit card or don’t have one that gives you several of the benefits listed above, I highly encourage you to do the research to get one for a variety of protections and benefits. Check out my guide to the best 5 credit cards for family travelers for cards that are tailored well for parents who travel with kids. But whatever you do – don’t rely entirely on debit cards or cash when you travel.
Track Your Cards More Easily with Travel Freely!
One of the major reasons so many travelers don’t take advantage of travel rewards with credit cards is that keeping track of everything can be a major time suck. But it doesn’t have to be that way. A new tool from Travel Freely does it all for you. Simply input the date you signed up for a card and it will track everything – when you need to complete minimum spending requirements to earn welcome offers, what cards you are eligible for and when, and when any card annual fees are coming due. It’s game-changing for the casual miles and points enthusiast.
Sign up for Travel Freely here – it’s totally FREE to use!
Advertiser Disclosure: Trips With Tykes has partnered with CardRatings for our coverage of credit card products. Trips With Tykes and CardRatings may receive a commission from card issuers.