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Paying For Your Trip – Credit Card vs Savings

Money is pretty much everything when it comes to starting your planning process. I can say from experience, it’s key. So the anxiety you feel before dropping a crazy sum to kick-start your trip should come as no surprise.

A deep breath can help with that. Remember, it’s an investment in your life. Enjoy it! In terms of the practical, there are two ways to pay for plane tickets: with a credit card (paying later) and with cash (paying now). I’ll talk about the implications of each method below:

Credit Card

If you don’t want to wait months or years to launch out into the unexpected beyond, your payment method of choice will likely be to put the money on a credit card and pay it off later. While some people do use cash, the greater majority still opts to pay with the good ol’ fashioned credit card alternative.

Before you ring up a huge amount on your current card though, think about getting a new account for the express purpose of your travels. This will help you organize and keep track of your expenses inside one account and also give you options. When looking for a new card, use a company that gives the most flexibility. Don’t pay more than the tickets were worth — look at 0% interest cards that allow 6 months or a year to pay the charge back with no finance charges. Also, make the transaction work for you — look into cards that give benefits, such as airline miles, rewards or cash back.

Research credit cards at This site has a comprehensive list of different cards available. Which one you use should depend on what you want to make it do. Be advised though that reward cards don’t usually lean heavy on the rewards part—the cash in “cash back” is typically only about 1%. Cash back pioneer Discover Card gives the most favorable return, with occasional bonuses of up to 5 or 6%. Airline cards are the cash equivalent in tickets with a $10,000 purchase giving you a ticket worth between $100 and $150, again around 1%.

Be prudent with how much you throw on your card, and I’m not the only one out there saying this. It’s way easier to add money than it is to remove it. Beware the dreaded credit card hangover.


If the thought of dropping $10 grand on a credit card terrifies you, you’re not alone. People are rightfully hesitant to go all out on their credit card debt, even for something as valuable as travel.

The alternative is to pay for the trip in cash. This method keeps the debt hangover at bay and your conscience guilt free.  Of course, if you’re singing a cappella in the I’m-not-rich choir than this method will require an equal amount of both foresight and determination. After all, saving money is not the average American’s strongpoint.

So how to do it then? Daniel over at Two Go RTW—a site he and his wife built to help them prepare for their own around the world trip—has outlined their methodology on how to reach your saving goals.

They have this to say:

In general, a comprehensive savings plan has five steps:

  • Assessment. Here you must hold your proposed itinerary up to the glaring light of your financial situation. Once you have a general idea of your trip’s day-to-day expenses and the time you would like to spend abroad, you’ll need to compile a personal income statement that lists your income vs. expenses.
  • Setting goals. A savings plan should comprise several goals, some short-term and some long-term.
  • Creating a savings plan. The savings plan details how to accomplish your goals. It could include, for example, reducing unnecessary expenses and/or increasing one’s income in order to meet or exceed a savings target.
  • Execution. Execution of a savings plan requires discipline and perseverance. We’ve found that sticking to a savings plan is easier if you can make it habitual.
  • Monitoring and reassessment. As time passes, one’s plan must be monitored for possible adjustments. You cannot take chances by being too aggressive or too conservative at the wrong stages. You have only a limited time to accomplish your goals, and you must be sure to allocate your savings properly. What you really want is assurance that your money will be there when you’re ready to start globetrotting. We’re talking about funneling your savings into money market accounts, short-term CDs and perhaps a bit in ultra-short-term bond funds. Remember, when it comes to your travel fund, the rule is stability first, return second. And, actually, with low (or declining) inflation, the current returns aren’t as bad as they appear.

Daniel also found a handy website that can help in your savings journey. On this site is a calculator tool that formulates a daily budget for whatever country your visiting based on expense needs they’ve averaged for each place.

To help in your saving process, my suggestion is to build a travel fund—using an individual savings account works well. Every time you visit your bank’s website, transfer a little money into the travel fund. I look at it this way, it’s money that may have been spent on something like a pizza dinner but now goes to feed your travel appetite.

A combination of the two

Probably the most practical method of paying for a trip is to use a combination of both the credit card and cash method. If you have some cash saved but not all, use it to keep from burning out your credit card. Or use the credit card for its benefits and immediately pay it off with the cash I have on hand. This keeps the money out of debt patrol while still giving the benefits of using a credit card.

Best of luck on the financial voyage that will allow you real voyage become all that much closer to reality!

* image credits jelenewwarbykennymatic

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