We spend billions of dollars on travel each year, with the average person taking a few domestic trips and almost a fourth of us venturing abroad. But we can do better, travel more and spend less, right?
Well, in many ways we must, considering that we’ve also racked up more than $260 billion in credit card debt within the past five years alone. So the real question is: how can we avoid being grounded while also keeping our wallets flying high? It won’t be easy, as everyone wants to travel on the cheap, but it is possible. Here’s how:
1. Plan Well in Advance or Get Flexible
Procrastination and rigidity are a lethal combination for a traveler’s budget. The best prices can usually be found well in advance, when demand for the reservation is lower, or through patient opportunism. So set savings alerts for your favorite destinations, and when the stars align with your schedule, pull the trigger.
While you wait, you would be wise to establish and regularly contribute to a special savings fund designed to pay for your trip abroad. This will help ensure that you’re financially prepared when the deal for which you’re hunting pops up.
2. Make Sure to Pack the Right Plastic
Your credit card can either save or cost you quite a bit of money while traveling, especially if you have an international itinerary. For starters, about 90 percent of credit cards charge foreign transaction fees, with the average being 2.02 percent of amounts spent; that makes a no-foreign-transaction-fee credit card a must-pack.
Ideally, your credit card should also subsidize a good portion of your travel expenses through rewards. For example, a number of cards now offer initial rewards bonuses worth $400 to $600 or more in travel for people with good or excellent credit, who can afford to spend a few thousand dollars within the first few months of account opening. You can, therefore, either use your trip’s cost to help meet that spending threshold or pay for your travels with the resulting bonus, assuming you open the account further in advance. The right credit card can also help you save another 2 percent or more on all travel expenses via regular, purchase-based rewards.
All you have to do to take advantage of these plastic perks is get your credit into shape, carefully choose your card, and redeem your earnings in whichever manner gives you the most bang for your buck. Oh, and remember to notify the issuer when you travel so that spending privileges aren’t mistakenly suspended due to suspicions of fraud.
3. Use The Island Approach
The Island Approach is a credit-card strategy that involves using a number of carefully-selected cards to meet each of your biggest financial needs. In other words, you’re isolating these needs as if they’re a chain of islands, hence the name. The idea is that while no credit card is perfect, offering the best rates, fees, and rewards across the board, a collection of cards can be.
For instance, you could use a zero percent balance transfer card to reduce the cost of debt, while employing a card with zero percent on purchases to pay down an upcoming big-ticket expense over time. And for purchases that you can pay in full within a single billing period, supplementing a cash back card that has a solid base earning rate with a card specifically geared toward travel can be quite lucrative.
4. Decide On Brand Loyalty
Do you have a favorite travel provider, or would you rather have the freedom to shop around? It’s important to make this determination as early as possible, as it will dictate your credit-card and booking options.
The basic rule of thumb is that if you fly at least 20,000 miles with the same airline or stay a minimum of 20 nights at the same hotel chain, you should think about committing to the brand(s) in question. If not, you’ll be far better off with a card offering brand-agnostic travel rewards, such as Capital One Venture Rewards or Barclaycard Arrival Plus.
5. Don’t Convert Hard Currency
You will get a far better exchange rate from your credit card and debit card, while avoiding the hassle of a trip to the bank or Travelex location and minimizing the risk of getting pick-pocketed.
In fact, if you use no-foreign-fee cards, you will save roughly 11 percent relative to Travelex and 6 percent compared to the average bank or credit union, according to WalletHub’s latest Currency Exchange Report.
6. Always Pay in The Native Currency
Merchants in foreign countries often try to attempt a ploy known as dynamic currency conversion on unsuspecting tourists. This involves a merchant offering to translate the price of a purchase into the buyer’s native currency, dollars for example, while using a decidedly unfavorable exchange rate to pad his or her pockets in the process. So make sure to always pay in terms of the local coin. And if you’re uncomfortable doing mental math on the spot, you can always quickly crunch the numbers on your phone.
7. Add Home-Sharing Sites To Your Search
In addition to considering hostels and hotels and searching for them on traditional travel-comparison websites, add the likes of Airbnb and VRBO to your price comparison efforts; this is especially helpful when you’re traveling with a large group.
At the end of the day, it’s also important to note that a “staycation” isn’t the worst thing in the world. It can be just as fun as a trip and equally enlightening, but with the potential to be significantly cheaper.
Even budget travel is expensive, after all. So if you can’t comfortably afford to go away this year, bide your time by feeding your bank account, so that it can feed your wanderlust when the calendar turns over. Your wallet will thank you!
This article was contribute by Odysseas Papadimitriou, CEO of the personal-finance website WalletHub, which offers free credit scores, full credit reports, 24/7 credit monitoring and customized money-saving advice.