Do you know the difference between a credit card and a debit card with a credit card symbol (V or MC) on it? Often times, I find many of my clients don’t really understand the fine differences between the 2 of them. This can lead to some challenges during your travel if you are not fully informed. I certainly recommend you to check with your bank and credit card company for specifics, but I thought I would share a brief over view of some of the differences for you.
Credit and Debit cards with credit card symbols have many similarities, such as they are all accepted at the same locations and offer great convenience. However, there is one fundamental difference between the two types of cards that can impact you greatly. The biggest difference is where the card pulls the money.
A credit card is charging it against your line of credit with your credit card company, as long as you have available credit, you can make the charge. Depending on your billing cycle you may have up to a month to pay the bill and may have the option of paying a minimum amount each month.
A debit card is pulling the money directly from your checking account when you make the purchase. They do this by placing a hold on the amount of the purchase. Then the merchant sends in the transaction to their bank and it is transferred to the merchants account. It can take a few days for this to happen, and the hold may drop off before the transaction goes through. The hold can also extend past the date of the transaction! For this reason, it is important to keep a running balance of your checking account to make sure you do not accidentally overdraw your account. It is possible to do that with a debit card. There are some other points of consideration when using a debit card for your travel expenses both when booking your travel and when traveling.
Many debit cards have a daily spending limit. Yes, I know, it can be “run as a credit card”; however, many of them are still subject to the daily spending limits. I run in to this daily with clients! They will have a deposit due of $500 and they only have a daily spending limit of $300; or they have a final payment due of $3500 and have a daily spending limit of $1000. It doesn’t matter how much money you have in the bank, if the card has a daily spending limit, it won’t confirm the transaction. With most banks you can call them, give the amount, and the merchant name and they will extend the limit for the business day. While I personally always process the payments with a couple of days or more to spare (for this and other reasons), if you have waited until the last minute, this can be problematic.
When it comes to fraud, while they both offer fraud protection, they do not handle it in the same way. Remember, your debit card is tied directly to your checking (or savings) account and has a higher fraud liability. If someone steals your card or the number, they can drain funds in relatively short order. Investigating this damage takes time. The longer you wait to report the fraud, the more likely you will be held liable for your own losses. If you choose to use a debit card when traveling and will be on an extended length trip, please make sure you have access to secure internet service (not a public wifi!!) to monitor any activity on your checking or savings account.
Also, many bank debit cards cannot be used outside of the US. You should check on this prior to travel! This will be very important to know. Debit cards are actually a great way (in all honesty, the best way) to obtain foreign currency from local ATM machines, but it will not help if your card is restricted from making international transactions. This is most common with smaller local banks. Credit cards on the other hand are not a good way to get foreign currency when traveling. If you use a credit card in a foreign ATM, it is often considered a “cash advance” and your interest may start accumulating right at the time of the transaction.
Finally, the dreaded “hold” on the account. When you are traveling, the holds can be extended for a good amount of time. I know one cruise line that will put a hold on debit cards for up to 3 weeks after travel. Depending on your financial circumstances and what other transactions you have automatically withdrawn from your account, this can be problematic.
When traveling, regardless of credit or debit, when you board a ship, or check in to a resort, you will need to have a credit / debit card in your name. You will not be able to use someone else’s card unless that person is rooming with you or with you on the trip and will provide financial authorization for this to be done at check in.
Another point is your PIN number for both debit and credit cards. Yes, credit cards have PIN numbers as well. If you are traveling in Europe, I highly recommend that you find out your credit card PIN before travel. You may need it to complete any purchases. These can often only be mailed to you, so please don’t wait until the last minute! Always make sure to contact your credit card and bank prior to travel outside of the US. You need to alert them so they don’t put any fraud alerts on your account for valid purchases you may try to make. I speak from experience when I tell you it is less than convenient to try and call your bank or credit card company from another country to resolve issues.
Both credit cards and debit card have distinct advantages and disadvantages when it comes to travel. The choice of which you use is your personal decision to make. I only ask that you know the differences so you are well prepared and don’t run in to any issues while trying to enjoy your travel experience.
Happy Travels!
Kelley