When you are traveling, using your credit card is a good idea as it is a safe way to pay for things abroad without being stung by the exchange rate. However, if you are using your credit card or take out a loan as a way to pay for your holiday, there are a few rules you should consider first.
Never Take Out More Debt than You Can Comfortably Repay
While taking out a loan to pay for your travels is a good way to get instant cash, it is important that you can make the repayments when you return. It can be tempting to take out lots of money in order to complete the trip of your dreams, but you do need to figure out how much you can you can afford. This means that before you agree to a loan, you need to figure out what the monthly repayments will be and how this will fit with your financial situation.
Always Repay as Soon as Possible
Once you are in debt, it is important that you start to repay the debt as soon as possible. Overpaying each month will reduce the amount of time you have the debt for and will also significantly reduce the amount of interest you end up paying. Overpaying will also help your credit card score.
If you want to make repaying multiple debts easier, researching the best way to consolidate credit card debt is a good place to start. Consolidating your debt usually involves either using a balance transfer credit card, which will help to reduce the amount of interest you pay, or using another type of secured debt. Whichever method you choose, you will now only have to make one monthly payment rather than multiple payments to cover the multiple cards you used.
Start Saving for Your Next Trip
However easy it may be to just take out a loan, travel and repay, getting into debt when you don’t need to is never advisable. Instead, if you want to go traveling, you should start a savings account and get saving!
There are lots of ways to start saving money for your travels, but the best idea is to work out how much your holiday will cost and when you want to go. This will help you figure out how much you need to save each month to reach your goal. So, for example, if you wanted to spend $2,000 on a month of traveling and you plan to go in 5 months time, you will need to save up $400 per month.
Having this information gives you an indication of how realistic your goal is, as well as clearly stating exactly what you need to do between now and your travels. When you know what you can afford, you can plan your holiday so that either you leave later or you find ways to spend less while you are traveling. It is much better to realize now if you can’t afford to save $400 per month as in the example that it is to fail to reach your goal and not really get why.