Travel Tip: The Power of Credit Cards
I’ve been asked this question so many times: Is it better to use cash or credit card when you travel?
In our experience, I would say it really depends. Yes, I agree, nothing beats cash basis in terms of conversion – if you know when and where to change your money. If you have all your cash exchanged on weekends, after banking hours, or at the airport, chances are, you have not maximized the power of cash.
When I started dating Charlie (who is now my husband), we would always argue when it came to payment time. I wanted to pay everything in cash, while he, on the other hand, was Mr. Credit Card. He would tell me to pay him my cash and then he would charge my expenses to card whenever possible. I didn’t understand him at first. I was, like many others, afraid of credit cards. I was afraid I would spend more than what I had.
Well, years of traveling with Charlie made me understand the importance of credit cards. His loyalty to credit cards has produced so many perks for us – from access to airport lounges to free flights to discounts on accommodations/ restaurants/ stores to a FREE GPS (well, he paid in points).
Since we’re talking about travel, I’d like to share the things I’ve learned on credit cards and traveling:
- Credit Cards Give You Extra Days To Come Up With Payment. It’s easy to estimate the cost of your travel if you’re only considering your flight, accommodation, local transportation, and food. But it’s never easy to estimate your cost for shopping because you don’t know what you’ll see and buy until you get to your destination. Cards serve as great back-up for unexpected purchases when you’re abroad. If you don’t have enough cash on hand to pay for that piece of dress that fits so well on you (and can’t find back home) or a unique piece that will work well with your furniture, you can always charge it to your card and have extra days to come up with payment. Ideally, it’s 30 days. But it all depends on your cut-off date for the card. My advice is to know your cut-off date for the card before you travel so you know how many free extra days you have before you’re required to send payment. Oh, and do advise your credit card company of your travel dates and destinations so they can raise the limit and be aware of your possible locations when you use the card.
- Cash Only Works If You’re Not Bringing A Lot. This may have been the reason why I preferred cash when I started dating Charlie. I was still in college that time so my budget for travelling was much lower. Now that we are both working, we have a more flexible budget for our travels, and I realized that this is why credit cards come in. Bringing a lot of cash can be a nightmare, and I’ll explain why on #3.
- Credit Cards = Safer Money. On our last trip to Europe, we stayed for 34 days. If you’ve been there or you’ve read up on their countries, you probably know the horror stories when it comes to scams. My friend who recently went to Barcelona was robbed, and all her hard-earned money was gone in seconds. Sadly, her case is not an isolated one. So many tourists have been robbed even in the most romantic cities. Someone told us before that robbers (in Europe at least) tend to watch out for Asians, because they know many of us keep a lot of cash in our wallets. So for long term travels, we gladly pay for the conversion difference if it means not losing all our money at once as a possibility.
- Credit Card offers perks you can’t get from cash. The obvious one comes in the form of travel/ shopping/ dining/ home-related rewards from the points you incur. This depends on the partner establishments of your bank. Basically, whenever you use your card, you gather points that you can use later on. So you get to maximize the value of your money. Moreover, sometimes, when stores go on promos, you can also pay with 0 interest for 3-6 months if you use credit cards! Or if you’re lucky, they can even extend to 24-36 months! Sometimes too, there are special discounts for stores and establishments if you use their partner credit card. We’ve taken advantage of these kinds of promos so many times. Other perks include being able to use it as a deposit for your hotel rather than cash. They give you back your hotel deposit when you check-out (which more often than not means it’s the end of your trip), so if you deposit cash, you get it back in cash, too, and you probably don’t need that cash anymore since your trip has ended, so you’ll be stuck with foreign currency you don’t need. This also works for shopping in places abroad with tax refund. If you use cash, many times, they refund the amount of tax at the airport, so again, you’ll have more cash than you need. We’ve personally experienced the breeze of using cards for shopping in Paris and Singapore. When we went to the tax refund counter at Charles De Gaulle Airport, the line for those who needed cash refund was long, while for credit card, all we had to do was fill up a form and drop it in their mailbox. In Singapore, it was also a breeze because all we had to was swipe our card and let their computers do the work. This really worked for us at that time because we got to both airports later than expected and were rushing to check-in. Bottomline is, many times, credit cards really offer more than cash in terms of rewards, special discounts, and convenience. They tend to stretch the value of the amount of money you are spending anyway.
- You Must Use The Appropriate Card For Your Purchase. Since my husband, as I have told you, is so fond of cards, we have at least 5 different kinds of credit cards from different banks. And as a holder, we study the rewards of each card. When I do the grocery, he would tell me to use the card that does cash back. When I load up on gasoline, he would tell me to use the card that has a promo with the gas station. When I buy flights, he would tell me to use the one that offers free insurance for our travels. When we travel abroad, he would tell me to charge using the one with the lowest foreign exchange conversion fee, etc. Knowing the power of each card you own helps you to maximize your card and its perks.
I know you’re going to ask next which credit cards we use. Since this post’s focus is on travel, let me talk about the one we use when we travel. Of all the cards we have, I must say, I like the FOREX conversion rate of Bank of the Philippine Islands (BPI) the most. Many banks charge around 3.5% conversion rate, while BPI charges only 1.75%. For example, you purchase an item abroad at USD 1,500 which when converted to peso becomes PHP 66,000 (applying a sample exchange rate of USD 1 = PHP 44). Other banks can charge a top up of 3.5% which means that you will have to pay PHP 68,327. With BPI’s lowest FOREX conversion rate of 1.75%, you can get the item at PHP 67,155! You can save as much as P1,172 for every USD 1,500 purchase with your BPI Credit Card!
To take advantage of the lowest exchange rate though, you must make sure you are being charged the local currency of the country you are at (USD if in the US, YEN if in Japan, BAHT if in Thailand, etc). Mabuhay Miles, KrisFlyer Miles, Cebu Pacifc GetGo Points, and AirAsia BIG Points can also be redeemed using the points incurred from our BPI Credit Card (We are using BPI Gold).
Now, here’s the best part…I’ve recently learned that when you purchase a flight using your BPI Credit Card (Blue, Gold, SkyMiles, and Corporate), you get a FREE TRAVEL INSURANCE! For the complete coverage, you can review this: http://www.bpicards.com/page/234.
At the end of the day, I think credit cards are important companions when we travel, but that does not mean I don’t bring cash. There are some places that still prefer cash basis (like flea markets, small restaurants and stores, bazaars, etc). But it’s always best to prepare for the unexpected purchases for things like shopping, emergencies, etc; so I would advice that you bring both cash and credit card (if possible, bring a couple of cards) and use them appropriately. Like mentioned, I would advice that you study the perks of your credit card/s so you know when and where to use them. Want to know which credit card you should get? I love this PROFILER page of BPI: http://www.bpicards.com/Profiler. Hope it helps, and happy travels!
DISCLAIMER: This post is a collaboration with Bank of the Philippine Islands (BPI). All words and opinions are mine.