Use Your Credit Cards Smartly on Vacation

by Dawn Handschuh, Personal Finance Writer

Ski trips or island getaways are a popular escape for winter-weary Americans, and recession or not, many travelers will likely be heading for the slopes or the islands right around the time those piles of roadside snow turn a dingy shade of gray.

Still, traveling on a budget will be a reality for more vacationers this season. Although paying down credit card debt may be high on your list of New Year's resolutions, don't cut up those cards just yet. If you're making plans for a quick dead-of-winter getaway, your credit card should be one of the first things you pack.

Most travelers realize that carrying wads of cash is not a good idea, but credit cards also trump traveler's checks and debit cards as the currency of choice while on vacation.

Here's why:

Convenience
Unlike debit cards, credit cards are widely accepted to reserve a rental car, hotel room or plane ticket. Business travel was, in fact, the reason that the first credit cards were created.

Fraud protection
If your wallet is stolen and you report the theft within 48 hours, you won't be held accountable for more than $50 of fraudulent expenditures. You'll be fully liable for any expenses racked up on your debit card.

Purchase returns or disputes
When you use a debit card to make a purchase, the funds are immediately withdrawn from the bank checking account that's linked to the card. Debit cards don't afford you the opportunity to dispute a purchase or get a refund if you find a problem with the merchandise. Credit card issuers will temporarily suspend billing and initiate an inquiry with the vendor, at your request.

Rewards
Depending on the type of card you own, you may rack up big rewards, points or cash back when you use your card on vacation.

Take these precautions when using credit cards:

• Take only the credit card(s) you need on your trip. Taking two ensures that if there's a problem with one card, you have a backup. (Store them in different places, so if one is stolen, you still have the other.) Don't needlessly expose store or gas credit cards to possible theft; leave them at home. Make sure you know your credit limits on the card(s) you choose to take with you.
• If you'll be traveling in multiple states or going overseas, contact the issuer of the card(s) you plan to bring with you. If you don't, the card issuer may mistake your vacation spending for fraud, place a fraud alert on your card and deny you authorization to use the card when you least expect it.
• If you're traveling abroad, find out in advance which of your cards can be used overseas. In certain places, some cards are more widely accepted than others.
• Ask the bank that issues your card what they charge for international transactions. You might choose to bring the card with the lowest foreign currency exchange fee, which is sometimes applied even to transactions processed in U.S. dollars.
• Make sure you have a phone number to call if your card is lost or stolen, and make sure it will work if you call from outside the U.S. Keep the contact numbers separate from your cards
• Carry your cards with you (a concealed money belt is best) or leave them in the hotel safe, but don't leave them in your room, which can be accessed by many people.