Let Your Credit Card Take You On Holiday
Smart Money

Let Your Credit Card Take You On Holiday

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As temperatures drop and days get shorter, daydreams of exotic getaways always seem to become more and more demanding. So, as winter closes in once again, many of us look for a way out; fantasising about turquoise waves and endless white beaches as we idly click on holiday deals, putting all the work we should be doing somewhere on the tomorrow list.

Aussies love a good holiday, whether at home or overseas. With Australians taking just over 11 million overseas trips in the past year (1), it’s really no surprise that one recent survey showed one in three Aussies say they love holidays so much they prefer to spend their money on travel over all other pursuits, including dining out and shopping (2).

But that doesn’t mean they’re great at saving for those much-loved holidays. According to the same survey – carried out by travel search engine Kayak – only half of those surveyed said they put money aside regularly when saving for a holiday, and just one in three held back on shopping and going out to increase their holiday funds.

So, how do Aussies pay for their holidays? The Australian Bureau of Statistics Household Expenditure Survey for 2015-16 showed that Australian households spend on average $4,004 each year on holidays (3). That money has to come from somewhere, and it seems for many, it doesn’t come from savings.

The right credit card could provide the answer. For those of you dreaming of jetting away this winter – or even making plans for summer – your credit card could help you get there. By using a combination of credit card features and offers, that escape could be more attainable than you think. Want to find out more? Let’s take a look at how your credit card could take you on holiday.

Getting You There

Flights and accommodation usually make up the biggest expense when travelling. So, how can we make those costs a bit more manageable?

Rewards

Using rewards points or frequent flyer points can help cover the cost of flights, hotels, car hire, holiday packages and more. You’re really only limited by what your rewards program offers – and how many points you have available to spend. If you want to get away this winter, a bonus points offer could give you the boost you need to make that happen.

There are plenty of introductory offers providing bonus points to new cardholders – but to find the right offer, you will need to compare what’s out there. Bonus points offers are usually tiered, so that premium rewards cards offer more points than classic rewards cards. Here are some important points to remember when shopping around for bonus points offers.

  • Consider the card’s annual fee. Higher earning rewards cards with larger bonus points offers tend to have higher annual fees. Just make sure the annual fee is worth it for what you are getting in return.
  • Check the minimum spend requirement. Again, larger bonus points offers usually have a bigger minimum spend requirement. Make sure the minimum spend is manageable – and that you can repay it before interest starts accruing.
  • Find out how long you need to wait for bonus points to be credited. Bonus points are usually credited to the cardholder 6-8 weeks after the minimum spend has been met. If you take three months to meet that spend, you could wait another two months to see your bonus points. If you can afford it, meet the minimum spend early if you need the bonus points promptly.
  • Look out for accompanying offers. Some bonus points offers will have other introductory offers on the side. This may include cashback offers and reduced annual fee offers. These extras could help make your trip all the more affordable.

Obviously, a rewards card is much more than just its introductory offer. Choosing the right card means looking at how well it will suit you as an everyday earner. When you compare rewards cards, take into account the following points to make sure you choose the best option for you.

  • Average Spend: Calculate how much you are likely to spend on the card.
  • Earn Rate: Knowing the earn rate and how much you will spend on the card will help you work out how many points you will earn.
  • Points Caps: With this in mind, you can check for any points caps to see if they will affect your spending.
  • Points Shaping: Knowing your spend will also allow you to see if your earn will be affected by points shaping (when you earn a lower rate after spending a certain amount each month).
  • Annual Fee: For a rewards card to be worthwhile, you will need to earn more in rewards than you pay out in annual fees.

Aside from bonus points offers, there are ways you can boost your points balance to make your rewards card more worthwhile – while also helping you earn more points for that holiday.

  • Channel all spending to your card. From your morning coffee to your rent, using your card to pay for it will allow you to stack up points faster. Just keep in mind points caps and different earn rates that may apply, for example on utilities and government spending.
  • Add a cardholder to your account. Additional cardholders can help you increase your monthly spend to earn more points. Just make sure that additional spending is affordable, and that the additional cardholder annual fee is worth paying for the extra points you earn.
  • Take advantage of double dipping. You can double dip for points when your rewards program runs a promotion with its vendors, allowing you to earn more points per $1 spent, accelerating your earn rate. Just be sure you are not spending for the sake of earning points.

Rewards cards don’t just earn points, they can also allow you to earn Status Credits. If you are a member of the Qantas or Velocity frequent flyer programs, the Status Credits you earn can help you climb the Status ladder to earn more privileges when you travel. The more you fly, the more you earn – and if you choose the right card, you may even earn bonus Status Credits as you spend.

Looking at Virgin Australia’s Velocity program, there are four levels of membership, starting with entry-level Red. Earning more Status Credits will allow you to climb the membership tiers to offer lots of lovely privileges whenever you travel, as well as the opportunity to earn more points to redeem on your next trip.

Silver membership gives you:

  • International Priority Check-in and Boarding.
  • Two single entry passes to access Virgin Australia Domestic Lounge.
  • 50% Points bonus, on top of the base Points earned, when travelling with Virgin Australia.

Gold membership gives you:

  • The opportunity to Fly Ahead to your destination on an earlier flight.
  • Access to more than 150 international premium lounges.
  • Priority Check-in, Boarding, Screening and Baggage.

Platinum membership gives you:

  • Four complimentary upgrades to Business Class for eligible domestic flights.
  • The opportunity to Fly Ahead to your destination on an earlier flight.
  • Access to more than 150 lounges worldwide, including Virgin Australia Lounge.

Time to redeem those points? For the most part, rewards programs offer the most value on points redeemed for travel. So your longed-for holiday is likely to make much better use of your points than if you were to redeem them for stuff you could buy elsewhere, like toasters and bath towels. Check out the following tips to help you maximise your points.

  • Understand your rewards program. Rewards programs are complex, so the only way you will make the most of what they’ve got to offer is to find out more about them. This includes how to earn more points, and how to redeem points to find the best value.
  • Redeem points with partners. You may find great deals when booking travel with your rewards program’s partners, so keep an eye out for special offers that stretch your points further.
  • Avoid booking fees. You may be able to save on booking fees by using your rewards program’s own booking service. For example, if you book directly through American Express Travel with your eligible American Express card, you may avoid booking fees altogether. This service could also help you access special travel deals that can be paid for in full or in part with your points.
  • Transfer your points. Depending on your card, you may be able to transfer points to partner programs. As long as the transfer rate is right, this could let you choose the program that gets you to your destination for the lowest number of points (note, some airlines specialise in travel to certain destinations, making those routes cheaper, allowing you to use fewer points). As an example, American Express Rewards partners with Air New Zealand, AsiaMiles, Emirates Skywards, Etihad Guest, Malaysia Airlines, Singapore KrisFlyer, Thai Royal Orchid Plus and Virgin Australia’ Velocity, as well as hotel partners Hilton Honors and Marriott Bonvoy.
  • Avoid interest. There is little that will chip away at the value of your points balance faster than interest. If you want to make the most of your rewards, don’t overspend, and always pay off your balance before interest starts accruing.

Features

While rewards can certainly take you places, there are plenty of other ways your credit card can help you cover the cost of travelling. Some premium cards offer travel credit, for example. This travel credit can often balance out the cost of the card’s annual fee, providing credit that can be put towards paying off your next trip.

Other cards, meanwhile, may offer complimentary hotel stays, helping to cut the cost of accommodation. This may provide a certain number of complimentary nights per year in partner hotels, or a ‘pay for three and get one night free’ offer. In terms of travelling in comfort, you may also find premium cards that provide upgrades on flights and hotel stays.

0% purchase offer

While rewards cards can be awesome, they’re not for everyone. So, what’s the alternative if you want to take a trip but don’t have the cash to pay for it right now? Choosing a card with a 0% purchase offer could provide a solution, allowing you to pay for your holiday now, and then pay it off over time while paying no interest.

These offers can be huge money-savers – but you need to deal with them correctly if you want to avoid getting into trouble with debt. Here are some of our top tips for finding the right 0% purchase offer, and how to make the most of it once you’ve applied.

  • Find an offer that’s long and low: Think about how much you plan on spending, and then how long it will take you to pay it off. Choose an offer that has the lowest rate – 0% p.a. is best – over a period that will allow you to pay off your spending.
  • Take into account the card’s annual fee: When comparing offers, be sure to look at each card’s annual fee. Paying a lower annual fee will provide more savings, allowing you to pay off your spending quicker.
  • Make a plan: Once you have applied for the card, make a plan for your spending – and try not to go over budget. Then pay off a certain amount each week or each month, being sure to pay off all your spending before the introductory period ends. Setting up automatic payments after payday could help with this.
  • Use your card on your trip: If you have the cost of your trip all paid off, you may consider using a 0% purchase offer for your holiday spending. Just be aware of the card’s foreign conversion fee and avoid overspending ‘just because it’s there’.

While You’re There

So, now we’ve talked about how your credit card can help you get away, let’s have a look at what it can do for you once you’re there. Obviously, your credit card can provide a great way to pay for stuff as you travel, often offering an easier and safer alternative to other options such as cash and travellers cheques.

But that’s not all. The right credit card could also save you money on things you may otherwise have to pay for yourself, while also making life all the more comfortable as you travel the world. Here are some features to keep an eye out for as you compare card options for your next trip.

Travel Insurance

While travel insurance as a feature is unlikely to wow you, that’s doesn’t mean it doesn’t have a lot to offer. Travel insurance for most people is an essential, allowing them to cover the cost if the worst happens when travelling. However, searching for travel insurance is mind-numbingly tedious. And, if you travel frequently, it can also be expensive.

Choosing a credit card with the right level of travel cover could allow you to save time and money on standalone cover – as long as you understand how it works. Yes, that will mean poring over the small print, but if you do it right, you should only need to do it once – rather than multiple times each time you apply for standalone cover.

When comparing credit card travel insurance, look at what is needed to activate cover, what’s included in the cover and what limits may apply, and what exclusions the cover has. For example, you may need to use your card to pay for at least 50% of your travel costs to activate your cover. Also be sure to check the excess, and whether domestic travel is covered under the policy.

Some advantages of credit card travel insurance include the ability to travel anywhere, unlike standalone policies that charge more for visiting different locations, plus the ability to travel into older age, where standalone policies may exclude policyholders above a certain age. Credit card travel insurance can also offer great coverage that is actually better than standard policies.

Airport Lounge Access

Airports can be busy, noisy and crowded. Airport lounges can provide a way to get away from all that, making travel so much more enjoyable. But, access to those lounges doesn’t come for free. Unless you have the right credit card, that is. Many premium credit cards offer airport lounge access, providing a couple of invitations per year or unlimited access.

While American Express cards tend to focus on providing access to its own airport lounges, other cards may offer lounge pass programs that allow cardholders access to a huge range of lounges around the world. Priority Pass offers access to more than 1,200 airport lounges around the world, while LoungeKey has around 1,000 airport lounges on its books.

Depending on your card, you may have Priority Pass or LoungeKey – or access to any other lounge program – included. With this, you can not only access the lounges on offer – complete with complimentary food and drink, places to work and the comfort to relax – you may also be able to enjoy discounts at participating food and beverage outlets and retailers at the airport.

Airport Assistance

Airports mean queues. But, with the right credit card in your wallet, you could skip the queues to enjoy a much more pleasant experience at the airport. If you happen to have a Citi Prestige Card, you can enjoy assistance at the airport, with complimentary airport transfers and a Meet and Assist service. This provides you with an airport agent that will escort you through arrivals, departures or connections, making your trip as seamless as possible.

Airport Transfers

Getting to the airport can be a hassle – but it doesn’t have to be, with airport limo service included as a feature on your credit card. While these airport transfers are not typically unlimited, they can make those special trips a bit more special, taking the stress out of getting to the airport, while saving you on taxi fares.

No Currency Conversion Fees

When you use your credit card to purchase something in another currency – whether buying online or in person when overseas – you will be charged a currency conversion fee on that transaction. This is usually expressed as a percentage of the transaction, but may involve a standard fee as well.

Currency conversion fees usually range from 2-4%, which can really add up if you spend a lot while travelling. Say you spend $3,000 on a hotel, $1000 on car hire, $2,000 on dining out and entertainment, and $1,000 on everyday expenses, that’s a spend of $7,000 on your card. With a 4% currency conversion fee, that would be an extra $280 to pay off.

Instead, you may want to apply for a card with no currency conversion fees. With no currency conversion fee, the 28 Degrees Platinum Mastercard could be a great option for holiday spending, especially as it has no annual fee.

Concierge Service

You often see concierge services included on premium cards – but what do they actually offer? While the scope of each concierge service can vary – with higher end cards often offering more – a concierge could be thought of as your personal assistant, on hand to help with your travel arrangements and recommendations.

You can call your concierge service around the clock, no matter where you are in the world, to ask for anything from directions to the nearest embassy to the opening hours of a store you were thinking of visiting. A concierge could arrange travel, book a table at a restaurant, recommend where to take the kids for a treat, or reserve tickets at the theatre.

Emergency Card Replacement

Imagine being on the other side of the world when your wallet is stolen. You have no money and no access to funds. What do you do? Well, if you have the right credit card, a call to your card provider could offer emergency card replacement and even emergency cash while you wait. Just be aware that some cards charge a fee for this, so read up on the small print before you travel.

When You Get Home

All good things must come to an end, even holidays. But, while it may be a shock to the system getting back to real life and all its drudgeries after being away, looking at your credit card bill could provide even more of a shock. According to that Kayak survey, 15% of participants admitted to not thinking about money while on holiday (4).

So, what can you do to deal with debt when you get back home? Whether you had to cover some emergency while overseas, or you just overspent because you weren’t paying attention to your finances, a balance transfer deal could help you deal with your debts more efficiently. Let’s take a look at how balance transfer offers work, and how to make the most of them.

Comparing Offers

  • Try to choose a balance transfer offer that provides the lowest balance transfer rate, with an introductory period that allows you to clear your debt.
  • Be aware of how much the card charges in annual fees. A low or no annual fee card may be best until your debt has been cleared.
  • Check whether there is a balance transfer fee to pay.
  • Find out how much you can transfer (this is often expressed as a percentage of your approved credit limit).
  • Check what rate your balance will attract if you don’t pay it all off before the introductory period ends.

Paying it Off

  • Create a repayment plan, arranging automatic payments that allow you to clear your balance within the introductory period.
  • Understand that for the most part, cards do not offer any interest free periods (such as 55 days interest free on purchases) while there is a balance transfer on the card. That means any new spending will attract interest from the day of the purchase. On a high interest card, that could get expensive.

Making Your Credit Card Work For You

Now we’ve seen how your credit card could help you cover the cost of that overseas adventure you’ve been dreaming of, looking at the various features and offers that could help you save on things you would otherwise have to pay for, as well as those features that simply work to make travel more comfortable and enjoyable.

However, you need to make your credit card work for you if you want to make the most of that escape. Before we go (and let you book that trip), let’s take one last look at the most important ways you can make the most of your credit card, to let it take you on holiday.

  • Weigh up the cost of annual fees: Rewards cards and premium cards packed with features generally have higher annual fees. Weigh up how much value each card offers you in rewards you will earn, and features you will use to find the right card for you.
  • Avoid interest: Interest kills value on any card, but especially on high interest rewards cards and premium cards. Avoid interest accruing by shunning cash advances and always paying off your card balance before it attracts interest.
  • Stick to one rewards program: While it can be tempting to earn all sorts of different rewards, you will usually get more value if you concentrate on one. That means only one annual fee to cover, and one balance to pay off. Look at programs that offer points transfer options if you need more variety.
  • Choose different cards for different tasks: Rewards cards work best as rewards earners, and may not be the best choice for paying off a balance transfer. Similarly, they may have high currency conversion fees for overseas spending. You may consider getting one card for overseas spending and one to earn rewards – as long as their annual fees make that worth your while. Choosing a balance transfer card specifically to pay off a balance transfer could also be a good idea.
  • Don’t overspend: This is especially true if you have a number of cards on the go. Don’t be tempted to spend simply because you have available credit. Keep track of spending using your card’s app, and set a budget that is manageable.

Time to compare the options? That’s exactly what CreditCard.com.au was made for. Check out the range of credit cards to find everything from rewards cards with bonus points offers and premium cards packed with travel perks, to fantastic deals on cards with purchase offers and balance transfer offers. Get clicking to find the card that will take you away.

 

1. http://www.afta.com.au/uploads/582/190531_may_afta-travel-trends-report_final.pdf
2. http://www.travelweekly.com.au/article/its-official-travel-is-the-no-1-activity-aussies-like-to-spend-on/
3. https://www.moneysmart.gov.au/managing-your-money/budgeting/australian-spending-habits
4. http://www.travelweekly.com.au/article/its-official-travel-is-the-no-1-activity-aussies-like-to-spend-on/

Founder - Roland B Bleyer

Roland Bleyer

Founder of Creditcard.com.au. Roland has extensive knowledge about credit cards in Australia. Known as a credit card expert, he has been featured on tv and in various publications.
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