But if you plan smart and ahead of your vacation you can have just as much fun and keep your credit and wallet intact.
1) It’s a smart idea to lower any debts well before the planned vacation. – Part of what makes up your FICO Score is Credit to Debt ratio or your utilization ratio. This really means how much of your credit line are you currently using? Paying down your balance frees up more of your credit line to use. Traditionally we should be spending between 10%-30% of your credit line. But remember… Never spend more than you have in the bank.
2) Create a daily cash or credit usage allowance: Having cash on hand is always a good idea. Especially if you are traveling internationally and have a card that charges International Transaction Fees. No matter what method of payment you are using you need to be setting daily spend limits. Basically make small daily budgets within your total budget.
– For example, plan to spend a total of $500 on food for the total trip? Maybe one day you will spend $30 and another you will spend $60 based off what you have planned for those days.
– If you go over your daily cash allowance or credit allowance dipping into the next day is alright but you will have less to spend later on. If you do need to spend over your daily allowance, try to spend that much less the next day to keep the rest of your budget intact.
3) If you ARE going to use a credit card on vacation (domestic or international) it is important to include those charges in your budget planning! When you get back from vacation and you get your card statement you will need to be able to pay for the transaction you made while on vacation. So be sure that in the budgeting process you take into account what your daily card limits are. Make sure you stick to them while on vacation, and make sure you move that money to a savings account or be sure to keep that in your bank before vacation to pay your bills after.
3.5) If you are traveling internationally and you have a card that charges International Transaction Fees you need to add about 5% for each transaction. This is important to take into account because by the end of your trip those fees can really add up and be a problem.
Its important to protect your credit this summer! The Starter’s Guide To Building And Protecting Your Credit can keep your credit in shape.
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