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This is going to sound melodramatic but whenever I see someone use cash or a debit card to pay for something, I instantly feel queasy and panicked. I go between lamenting over the lost travel rewards and biting my cheek to stop an on-the-spot travel rewards consultation.
I warned you it was dramatic.
But, in all seriousness, my practical thoughts (usually) win out. Everyone likes to get the most from their money. No one would choose to spend more for the same exact thing they could get elsewhere for cheaper. Nor would someone throw away pennies on the dollar just for the sake of tossing money out.
My point is people are or at least try to be sensible with their money.
Well, if you’re one of these people and you’re someone who wants to travel more, I’m here to tell you your cash and debit card habits make reaching your travel goals even harder.
If you’re a responsible spender and pay your bills on time, you can absolutely get more travel rewards from your money.
So, put your cash and your debit card back in your wallet and get yourself on a path to smarter spending combined with earning travel rewards.
3 Ways Cash and Debit Cards Make Reaching
Travel Goals a Challenge
1. Paying with cash or a debit card does not build any credit history.
Your credit score is determined by many factors like paying your bills on time, the age of your credit accounts, and how much of your available credit is actually in use.
Your credit score is not at all connected to the amount of money in your checking or savings accounts. It has nothing to do with how much money you make or if you’re paid by cash or check.
Conversely, when you use and pay off a credit card responsibly, you build trust with that bank.
This is also a signal to other banks that you’re a reliable, trustworthy person.
What does this have to do with your travel goals?
As you build your credit score, you’ll be eligible to apply for credit cards with lucrative travel rewards welcome offers. The offers are usually valuable frequent flyer miles or hotel points and credit card points. These can be used to redeem for free flights and hotel nights.
These credit cards also come with additional travel benefits like elite status at hotels, airport lounge memberships, primary insurance on car rentals, and/or a fixed travel credit to offset other travel expenses.
When you pay with cash or a debit card, there’s little if any record of your spending or repayment habits for banks to see. Most banks will want to see a credit score of at least 700 to get approved for travel rewards credit cards.
A thin credit history can mean a lower credit score which limits your ability to be approved for travel rewards credit cards.
2. You get no return value on the money leaving your wallet or bank account.
When you use cash or your debit card for your bills and everyday spending, the money simply leaves never to be heard from again. Heck, you don’t even get a goodbye or pat on the back for being so financially responsible!
Let’s be clear. I’m not talking about spending more than you’re able to spend and winding up in a black hole of debt. Quite the contrary!
I’m referring to the money you already spend every day on everything from gas to groceries, cell phone costs to insurance, birthday gifts to movie tickets.
The key is to squeeze more from the money you already spend to get value back in return.
What does this have to do with your travel goals?
Whether you’re saving for a family vacation to the Caribbean, a romantic European escape, or an epic solo adventure in Southeast Asia, you’ll reach your travel goal faster when you make your money work harder for you.
Use a travel rewards credit card to pay for everything from auto insurance to medical expenses, gym memberships to vet costs, and earn miles and points you can redeem for travel later on.
Do you know how much your bills and expenses add up to over the course of 3 months?
If you’re like most people, that dollar amount is in the thousands. Why not use that money to meet a minimum spend and earn a travel rewards credit card welcome bonus?
These bonuses are oftentimes already enough for at least 1 round-trip domestic flight!
After you earn the bonus, continue to use the credit card for your regular bills and expenses to earn even more miles and points.
Even if you’re skeptical about the value of frequent flyer miles and hotel points, there are plenty of credit cards that offer cashback rewards you can use towards your travel goals.
The point is when you use cash or a debit card, you’re not earning anything in return.
You’re sending your money off into the world while you stay at home still wondering how you’ll ever afford that pristine beach or iconic European city.
3. You miss out on added value with bonus categories.
To make matters worse, paying by cash or with a debit card does nothing to maximize your spending. On the other hand, travel rewards credit cards often have spending bonuses. You can earn 2x-5x more for every dollar you spend in specific categories like gas, dining, or drug stores.
What does this have to do with your travel goals?
You can earn even more miles, points, and cashback rewards when you maximize bonus categories and redeem for award travel even faster.
Let’s imagine you spend $100 on groceries every week.
When you pay cash or with a debit card, that $100 gets the food you bought and nothing else. Use a travel rewards credit card offering 5x the points on grocery store purchases and get the food you bought plus 500 miles or points for travel or cash-back rewards.
As a one-off, it may seem like a drop in the bucket, but over time, the value adds up.
You don’t have to pay your monthly expenses and save for travel separately.
Use a travel rewards credit card for everything and you’ll simultaneously be showing your credit trustworthiness, earning miles, points or cash back, and maximizing your spending for added value that can be redeemed for travel rewards.
It all makes sense but….
- Won’t too many credit cards hurt my credit score?
- I’m afraid using a credit card for all my spending will only land me in a load of debt.
- Airline, hotel, and credit card miles and points are so confusing and overwhelming. They’re just not worth my time!
Start slowly and get yourself organized.
As with anything new, you want to organize and learn as much as you can. But, don’t let overwhelm, confusion, and myths about travel rewards credit cards keep you from realizing your travel goals.
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