gap year credit cards
Nothing screams excitement and adventure like comparing credit cards and interest rates, right? The best credit card for travelling can be your best friend bar none when it comes to saving money before and during your gap year.
The way there is long and treacherous, though, as fees and interests can sneak up on you if you are not careful – but if you are, and you learn to play the system, you can find yourself flying for free in no time.
Debit Card vs Credit Card
You might already have a debit card and be thinking of taking that with you, but a credit card works completely differently and offers some crucial extra features that can benefit you on your travels.
A credit card allows you to charge to the card and pay it back at the end of the month – or later, but with a steep interest rate, which you should avoid at all costs! It will also protect your purchase against cancellation or the company failing.
A debit card draws only from money that you have on your account, but offers less protection on spending.
Using your credit card
So, the credit card allows you more flexibility in spending and added security. The best credit cards for travelling are accepted worldwide and if you use them right, they make sure you are never stuck without money.
Most importantly, a good travel credit card can not only save you money and earn you points which you can use towards free flights, but it will also save you from paying inflated exchange rates and overseas commissions on spending while you’re on the road.
However, it’s important to debunk one of the most common misconceptions around credit cards – namely, that they are essentially free money.
This is a dangerous and completely false belief. In reality, a credit card can be a source of heavy debt if you don’t learn to use it wisely and pay off your spending at the end of each month.
With that in mind, I can almost hear you screaming, where do I even start looking for a good credit card that will earn me all the points and all the rewards?
Having said that, though, once you get the hang of it, your credit card can become your favourite travel companion.
What are the different types of credit card?
The type of card that’s right for you entirely depends on the benefits you are looking for. There are five types of credit card available:
Standard Credit Card: These are your bog standard credit cards that may come with perks such as 0% interest balance transfer, or low interest fee cards.
These offers are usually only available during the initial period of you owning the card, and they would be especially good if you have existing debt and want to pay no, or minimal, interest on it while travelling.
Rewards Program Credit Card: These cards allow you to earn points for every pound you spend. Common reward cards include cash-back credit cards, and hotel and travel cards.
To get one of these cards you would usually need good credit, and they tend to have an annual fee.
Airline Mile/Frequent Flier Credit Card: Similar to rewards credit cards, every time you spend on your card you will collect points.
With company branded cards you can only collect points for that particular airline, and with general credit cards you can collect points for many airlines.
You can expect to pay an annual fee with this type of credit card, but if you are planning on flying regularly and using the card a lot then the annual fee would easily pay for itself.
Specialty Credit Card: This would be a business credit card or a student credit card.
The student credit card is most likely the one that applies to you out of the two. Student credit cards tend to have less rewards and benefits, however they do allow you to work on building up a solid credit history.
Bad Credit Credit Card: Maybe you have already had a credit card and did not budget wisely, causing bad debt and bad credit. If so all is not lost, as these types of cards are aimed at you.
You can either apply for a secured credit card, or a prepaid credit card. A secured credit card means you have to put down a deposit before you are given the card. And a prepaid card is pretty self explanatory.
Both cards allow you to work on improving your credit rating as long as you budget well and regularly use and pay them off.
What is the best credit card for travelling?
If you are focused on rewards and air miles, then a high sign-up reward card might be for you; or perhaps you are looking for something to clear any existing debt, in which case a balance transfer card might be right.
Most importantly, like I mentioned, one of the most attractive features of the best credit cards for travelling is that some of them come with many shiny travel perks, such as air mile offers and discounts, as well as companion flights, upgrades, and points for hotel stays.
For me, I like using credit cards because of the air mile perks: I figure, I’m going to be spending money anyway, I might as well be earning a free flight for it!
How Having a Credit Card Can Help
When should you get a credit card?
ASAP! You should get a travel credit card as soon as you know that you want to embark on a gap year; that way, you can start spending with it and accumulating points and benefits that you can then use towards paying for your adventure.
The point system usually works according to how much you spend (e.g. 1 air mile per 1 pound spent), so it makes sense for you to get to it right away to get as much benefits out of it as possible.
The best credit cards for travelling also offer quite large bonuses for signing up, which require you either to spend a certain amount in one transaction or within the first few months (e.g. spend £1000 during the first two months and earn 10000 points).
What about my credit rating?
These reward-heavy credit cards are usually only available for people with a good credit rating score. If you’re unsure what your credit rating is, you can check it on Experian, who now offer a totally free service.
If you’re worried about having poor credit rating, signing up with a secured credit card can be a good first step to take before approaching the more attractive and competitive travel cards. A secured credit card works almost like a prepaid card in that you can spend what you initially inputted into it.
Being wise and disciplined when using one of these cards can improve your credit rating score. If you can keep up the good work with one of these cards for a few months, then you will have boosted your credit rating enough to apply for the awesome travel cards that will change your travelling ethos forever.
What should you look out for?
When you choose the best credit card for travelling you should also look out for these things:
Many credit card providers will ask for an annual fee, and often quite a high one at that: your ideal is to find one with no annual fee, which gives you the perks without asking for your entire wallet in return.
The annual fee usually comes with some added perks, however, so depending on your needs and how much you are planning to spend, it might make sense to pay for it. Take these two British Airways American Express cards – the Basic and the Premium Plus for example.
The former charges no annual fees and offers 5000 points on a £1000 spend in the first three months, whereas the latter charges a chunky annual fee for a whopping 25000 points upon a £3000 spend in the first three months.
So whether or not you should be forking out the extra annual fee for the added perks entirely depends on whether you think you will be using them, and whether or not you can make the minimum spending required to get them. If you can’t, there’s no point in paying the extra money, as the no-fee option works just as well.
Ideally, you also want to look for a credit card with low transaction fees, which means they won’t charge you – or they won’t charge you much - every time you make a payment. This is especially important with foreign transaction fees when you are travelling!
This Barclaycard Platinum travel credit card charges no fees for cash withdrawals or purchases overseas, and if you pay off in time it also charges no interest.
Big Sign Ups
A big sign up bonus is what is sure to boost your benefits faster than anything else. A credit card that offers a big point bonus when you subscribe will either ask that you make a single big purchase or that you spend a certain amount within a certain time to retrieve the points.
The MBNA Virgin Atlantic White credit card offers a great sign up offer of earning up to 3000 bonus points on your first card purchase made within 90 days as well as a zero interest balance transfer for up to six months. And all this for no annual fee. Not bad!
This makes a real difference when you are trying to gather up points for that free flight to Singapore you have had your eye on for months.
Visa vs. MasterCard
You might be wondering whether there is a huge difference between Visa and MasterCard circuits. While these are not equally accepted in all parts of the world, they are pretty ubiquitous, so whether you go for a Visa or MasterCard doesn’t matter as much as the perks that the specific issuer, i.e. the bank or company, are offering you with that credit card, as the people at NerdWallet advise.
It might be a good idea to get one of both, just to make sure you are covered in both circuits, to avoid the nightmare of finding your card not accepted in a certain area. This is especially important in an emergency, where you might find yourself in hospitals where you get denied care if you can’t provide a functioning credit card.
If you are in a position to get a higher level card though, then MasterCard are far superior, as you can see from this table by Value Penguin.
Good practice for credit card use during travel
Remember: credit cards, or the banks behind them, benefit from your mismanagement of them. If you forget to pay off the debt at the end of the month, you cry, but they party, as the interest they make from late payments is the reason they want people to sign up for credit cards. So make sure you are set up for success and learn how to make the most of your credit card on your gap year without falling into the traps.
Set up a direct debit: First of all, you want to set up a direct debit to pay off any spending you have made during the month, so that you never risk forgetting. As chief Money Saving Expert Martin says, especially with airline cards, if you don’t repay in full every month your interest will kick in and debt will start building fast, making the benefits of the card almost null compared to the interest paid.
Setting up a direct debit just makes sense in terms of peace of mind, too, as you don’t want to be in the middle of a week-long hike in the Andes and have to worry about calling the bank and sorting that payment out.
Do a balance transfer: If you’ve found yourself in that desperate last-minute-phone-call-to-the-bank situation and have ended up accruing any credit card debt, you can also decide to transfer it to another card, as long as it provides balance transfers with zero interest for an initial time. This would allow you to pay off any existing debt within that time frame without incurring any interest.
This system could potentially allow you to never have to pay interest on your debt again, though it’s a tricky game to play if you’re not careful with your dates, and if you’re not on top of your multitasking game!
Find a 0% interest credit card: If you anticipate a big spend, a 0% interest credit card which charges no interest on spending for a fixed amount of time could be the right choice for you, provided as always that any spending is repaid in full by the end of the interest free period.
This could be a good idea for those of you who are paying for accommodation in advance of departure, or for any insurance or visa costs, or even for your flight.
Always choose local currency: If you anticipate a big spend, a 0% interest credit card which charges no interest on spending for a fixed amount of time could be the right choice for you, provided as always that any spending is repaid in full by the end of the interest free period.
Last but not least, the golden rule for credit card payments abroad is: when given the option to pay in your own currency, always reject it and choose to pay with the local currency! This makes sure that the exchange rate is calculated by your bank rather than the local POS terminal – which is sure to keep it lower and more accurate.
Use your credit card to travel longer and smarter
A credit card can help you stay longer on the road if you use it wisely and take advantage of every possible reward! Think of all the expenses you have during your gap year, all the hotels, gear and flights you purchase… these can build up your portfolio of miles and offers that you can use for an extra trip before you return, or a hotel upgrade, or whatever you like.
Your credit card can be your travel agent and your best friend all in one. As long as you remember that it’s not free money and you are smart and realistic in your spending in accordance to your budget. This means not overspending and being proactive and prepared to pay it all back at the end of the month. It’s all about using the credit card, and not letting the credit card use you!