Cash is king. Or is it?
We all know the economy has impacted the travel industry, and consumers who want to travel. Sometimes in surprising ways.
A recent Wall Street Journal article highlighted a new phenomenon called the “plasectomy.” That’s when dissatisfied (or enraged) customers blow up, shred, chain saw, incinerate, or smash their credit cards in response to having credit limits slashed or cards cut off. Credit card issuers have responded to the new economic dynamic by biting the hand that feeds them, and customers are biting back
Even if you aren’t squabbling with your card issuer, it can seem liberating to shed the temptation those little pieces of plastic represent. Many folks I’ve talked to – who previously had hot and heavy love affairs with their cards – are pondering a divorce. The chance that they’ll run up too much debt seems just too risky these days.
But wait! As long as you have a choice, don’t slam the door so fast!
At first, walking away might seem like the best option. In a panic, it might not be obvious why you should hang onto that card after a 15% interest rate increase. But unless the credit card company has sent you packing, even a high rate card is better than none.
Ever try to get a rental car without a major credit card? Not so easy, is it?
I should know. Recently I got a call from my parents on a road trip to New Orleans. Instead of hearing how wonderful their trip was going, Dad told me their car died. Just get a rental, I said, almost absentmindedly.
Except Mom and Dad had taken the advice of some financial guru and cut up every real credit card they had, keeping only a debit card. I tried to get them a rental on my card, but no dice – most major rental car companies will only accept a card when the actual renter is an authorized signer.
One industry article says most major rental companies will rent with a debit card if you press them. You might have to speak with a manager and/or present another form of ID, such as a bill. Some airport locations require proof of a round trip ticket. According to the most recent information available, Rent-A-Wreck rents to cash/check/debit customers and those under 25, but it might be tougher to find a location at or near an airport. Find more info on renting with a debit card here.
Eventually we found a company that rents with only a debit card, but those transactions can require a substantial upfront deposit. Since my parents needed a one-way rental (another big obstacle), let’s just say the needed deposit was super-sized. (Most rental companies are franchises allowed to set their own policies. Even among brands, policies differ according to location, and the length of time the deposit hold remains varies widely). Back home, I transferred funds into their account to insure there was enough cash for the hold and all the other expenses involved in having their car towed home and driving back. By then I needed a martini.
A card is pretty handy when renting a car for other reasons, too. Credit card rental insurance allows you to decline the pricey coverages companies throw at you. Be careful, though – that coverage is secondary coverage. It kicks in after your personal auto policy. You’re still covered (subject to limitations) for most damages, but- if you don’t want your insurance company to hear about an accident with a rental, you might want to take the coverage offered at the rental desk.
Disclaimers, that dirty word. Both personal auto policies and credit cards may not cover damages from the ‘loss of use.’ Some card companies limit coverage on certain types of vehicles, those over a certain MRSP, or certain geographical areas. Credit card policies usually don’t cover personal liability, personal injury or damage to other vehicles or property. The good news is, if you don’t own a car and have no auto policy, a credit card policy can stand in, subject to the issuer’s restrictions. When in doubt, read your issuer’s policy very carefully. (Sample card policy – Citibank’s – here. The last word(s) on rental car insurance: travel insurance. If you already have it, add the rental car option.
Truth is, if you’re going to travel, you probably need a credit card. Hotel reservations, plane tickets, almost every travel transaction requires or is made substantially easier with a credit card. Especially if a transaction ends in a dispute. Cash can disappear pretty quickly when things go wrong, but a credit card company can be a good ally if a transaction goes awry. If thieves strike, you might lose a whole wad of cash, but most credit cards companies cover all losses except the first $50 if the incident is reported within a reasonable amount of time.
Traveling overseas can be both safer and easier. Credit cards eliminate the need to carry large amounts of cash or deal with currency conversions and fees. No more getting ripped off at the airport money exchange counter – just make sure your card will be accepted wherever you are traveling. Also find out if you need to inform your provider you’ll be using the card in a foreign country – some travelers’ cards are suspended when used outside the U.S. because fraud is suspected. And although usually convenient, confirm your card’s foreign exchange policies – some charge a separate fee for each transaction. Those can add up.
Others use cards religiously when traveling because of reward programs – nothing like an expensive vacation to rack out some points! Programs vary widely, but the Web site can steer you in the right direction to get the card that will benefit your needs and your usage patterns the most
Some employers also let employees keep points earned from work travel. But since I’m not a tax accountant, seek professional advice to determine if the latter is taxable. Most say points gained from a personal card are non-taxable – in general, the IRS treats rewards as ‘rebates – but the line gets hazier for employment related rewards. For more of a discussion on this subject, go here.
Americans seem to have a love-hate relationship with credit cards. After a decade of easy credit and flying high, some credit card holders are being grounded. If you’re still flying high with your plastic, you might not want to leave home without it.
