Should I Use a Credit Card or Cash When on Vacation?

For convenience and security, not to mention rewards, credit cards are generally the smarter choice for purchases.
Aug 14, 2014

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You're headed out on vacation, and when you get wherever you're going, you plan on spending money. Should you use a credit card or cash? There are pluses and minuses to each approach, but on balance, it probably makes more sense to use credit cards.

Advantages of using credit cards

Convenience: Credit cards are almost universally accepted. When you're in a strange city, you want to be spending your time seeing the sights rather than hunting for an ATM. Many banks also impose daily limits on cash withdrawals. That $400 whale-watching excursion might be out of reach if you can't pull more than $200 out of your account. If you're in a foreign country, using credit cards also relieves you of the task of converting U.S. currency to the local money.

Security: Carrying a wad of cash is rarely a good idea, especially when you're away from home and distracted to the max. If you get pickpocketed, or even just absent-minded, the cash you lose is undoubtedly gone forever. If you lose your credit card, you can call to cancel it and get a replacement expedited to you. You won't be held liable for unauthorized charges either.

Arrangements: Don't expect to be able to rent a car or reserve a hotel room without a credit card. Even if it's possible, you'll be required to jump through hoops.

Rewards: If you use a rewards credit card, you'll earn cash back, points or miles on every purchase. In effect, the spending you do on this vacation could give you a head start on the next one.

Advantages of using cash

Budgeting: If you don't want to spend more than, say, $100 a day while on vacation, that might be easier to pull off if you leave the hotel room with only $100 in cash. No math required — when the cash is gone, you've hit your limit. If you find that your spending discipline breaks down when you use credit cards, cash may be a better choice.

Scam protection: By using only cash, you don't have to worry about your card being overcharged and you not finding out about it until you get home. Overcharging is a possibility anytime you use a card, but the risk may be higher in tourist areas. And unless you're scrupulously saving receipts — something not everyone does on vacation — it may be harder to prove to your credit card company after the fact.

No foreign transaction fees: This applies only if you're going outside the United States. Most credit cards charge an extra fee of up to 3% on purchases made outside the country, although you can find cards that don't.

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