Today I am going to try to help you save FOR travel and WHEN you are traveling. Use a credit card.
Now you might be thinking, “How can I save money for my next trip by using a credit card”. “How can I save money with a credit card when I travel?” Now I am not trying to get you to rack up debt. I am totally against that. I believe your only debt should be your mortgage and possibly your car payment. I know that lots of people have student loan debt. Many times, this is a necessary evil but an evil no less.
First, never charge a trip UNLESS you can afford it. That means, if you cannot pay for the trip before you go or within thirty days after your return, maybe you should reconsider the timing. I think travel is important because it can be educational. Travel can be refreshing so that you can be a better employee, husband/wife, parent, son/daughter or friend. It can broaden your horizons and give you something to talk about with your friends and family. It can be helpful in business when you can talk to business colleagues, clients, and potential employers about a mutual or similar place that you have traveled to. It can be ‘bonding’. Just as important, travel is fun and can be exciting. NEVER PUT YOURSELF INTO DEBT FOR A TRIP, even if it is a “once in a lifetime” trip.
Second, one needs to be disciplined if they are going to use this method. If you are not, or cannot be disciplined, DON’T do this either.
Now, this is actually very simple. Get a cash rewards credit card if you do not have one. Unfortunately, nothing in life is really free. The interest rates that I found on several of these cards ranged from about 12% to 23%. (23% used to be considered a USARY rate and was illegal in many states but the credit card industry has a better lobby than us regular people will ever have.) If you can be disciplined, even with these interest rates, you can save money. It requires one to pay off the balance each and every billing cycle so that your actual interest charged/paid is ZERO. If you are lucky enough to find such a card with no annual fees, using it this way costs you NOTHING. This is what I do. Sometimes it means making a few payments a month to cover my “USUAL” expenses. I try my best NOT to buy stuff that I don’t need.
Now when I say I pay my usual expenses I mean my monthly phone bill, cable/internet bill, storage locker rental fees, gas, groceries. When I buy clothes, I only by what I can pay for in cash but I put it on the card. I pay my dentist and doctor co-pays with the card (I don’t have a medical savings account anymore). If I could pay my electric bill and my rent too, I would. I collect 1.5% back on EVERY purchase I make without limitations. And like I said, I pay off the balance each billing cycle so I pay NO interest.
One might ask, “Why does this idiot not just use a travel rewards card or a specific airline rewards card?” The answer is simple. With general travel rewards cards, one accumulates points that can be used for airline tickets, sometimes hotel stays and cruises. With some cards, points are converted to a cash equivalent that can be used on many different airlines. That can be good but one has to accumulate large numbers of points and keep track of the conversion rates that could change. With a specific airline rewards credit card, you are stuck to that one airline only when cashing in. With my CASH rewards card, I know exactly what I have. I book my airline reservation, my hotel reservation or my cruise reservation, charge it to my card and use the accumulated cash reward to pay that portion of the bill and get 1.5% cash back. If I have any cash left, I can charge my travel incidentals and move on, again getting 1.5% cash back.
This does not preclude one from participating in airline frequent flyer programs. In fact, I recommend it. You can accumulate points that can be used for flights on the particular airline for free or discounted flights. I also recommend trying for focus your flights to a few airlines so that you accumulate frequent flyer points that you can cash in quicker. Additionally, if you don’t travel regularly, I recommend trying to use the same few airlines when you fly because many airline frequent flyer program points now have an expiration date. THIEVES. I try to focus my flights to JetBlue and Southwest.
Unfortunately, my card charges a $39 per year annual fee. It is not good but it could be worse. There are many cards that charge $85 per year for the privilege of having their card in your pocket. There are cards with an annual fee as much as $495 per year, such as the MasterCard Black Card. (That’s just crazy but it probably has some other perks, I hope.) By the way, my cash reward card is the Capital One Quicksilver MasterCard with the $39 annual fee. (There are at least five other cash rewards cards that I found on the internet at the time of this writing.) If I had used a non-rewards card or paid for my usual expenses with cash or check, I would not have even gotten the relatively small 1.5% back. Something is better than nothing. Since I pay no interest by paying the balance each billing cycle, the cost of the card to me is total of $39 per year.
Some of the travel cards with higher annual fees have other perks such as airport lounge access, travel insurance, rental car coverage, concierge services, etc. If these services are not important to you, I would look for the card with the lowest annual fee.
So far this year, I have paid for three round trips from Boston to Kansas City and one from Boston to Chicago. Using the cash rewards card made it possible for me to take my two sons to Kansas City for vacation this year and for me to go to a conference in Chicago.
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DrJ@the-wandering-doc.com
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