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If you’re an avid traveler, then you must have been one of the millions who were heartbroken at the height of the COVID-19 pandemic. Tourism was one of the sectors that was impacted the most, and many livelihoods, public services, and opportunities were affected. Now, the worst is over, and pandemic restrictions have loosened significantly – but things have changed for tourists, especially now that costs for travel have risen quite a bit. Read on to find out how your credit affects your travel.
The State of Tourism: What You Should Know
According to forecasts from UNTWO, international tourist arrivals could reach 80% to 95% of pre-pandemic levels this year for all regions. But they also point out that the current economic situation could mean tourists adopting a more cautious demeanor in 2023. This translates to shorter trips and choosing destinations closer to home. We think that this change in attitude makes a lot of sense. Now more than ever, having your finances in order is a good idea, especially if you’re planning to travel soon.
Why Your Credit Score Matters Now More Than Ever as a Traveler
Many people know the importance of saving up, spending less, and financial planning to achieve their goals. Yet around 4 out of 10 Americans are unaware of their credit score. Your credit score is a crucial part of your financial life, and a good credit score can open up a world of opportunities for travelers. You can take advantage of exclusive offers from service providers and other businesses that recognize the value of having a good credit score as long as you are responsible for the upkeep.
Credit Score 101
A credit score is a number that ranges from 300 to 850, which encapsulates your creditworthiness. This is based on factors like credit history, number of active accounts, debt, and repayment habits, among others. The higher the score, the better your financial standing will be. In UpgradedPoint’s guide to hard vs. soft credit checks, they explain that lenders, insurance, and credit card companies perform both. The difference lies in their effect on your credit score.
Hard checks are performed when you submit a financial application. In a travel context, this could be for a travel, hotel, or flight credit card. You could also apply to stay in an apartment or rent a vehicle for a period of time. Every hard inquiry will reduce your score by up to five points – if your score is high enough, it will have little impact on your overall creditworthiness. Soft checks, on the other hand, can occur without your approval and are usually pulled to check your eligibility for promos, rewards, and the like.
Good to Excellent Credit Score: The Travel Benefits
So, you’re wondering how far your credit score can take you. If your credit score is in the 670-850 range, then you’ve got yourself a good to excellent credit score that can give you access to the following benefits:
- Get lower exchange rates
You would typically use a currency converter with the correct rate to figure out how to pay with money in another country. However, using a credit card is typically more advisable than withdrawing cash from an ATM abroad because fees and interest charges are usually quite high. The best option would be to get a credit card from major international providers with little to no foreign transaction fees, and to apply for those, you would need a good credit score.
- Good for cashless economies
The pandemic changed the rules for travel in so many countries, and one of those would be the prevalence of cashless systems. It’s a fast and convenient way to pay, after all. If you’re using your card often with a bad credit score, banks are more likely to freeze your card because they might think you can’t pay back the credit. However, with a good credit score, you can freely use your card on businesses and even collect cashback while you’re at it.
- Lower deposits for accommodations and transportation
With the increase in online transactions, companies have become more guarded against online fraud. As a result, those with lower credit scores are often made to pay larger deposits when booking hotel rooms or renting cars. On the flip side, having a good to excellent credit score allows you to take advantage of exclusive offers from businesses and institutions that recognize the value of having a good credit score. You might even get sign-up bonuses from services like Airbnb, Booking.com, or Uber.
Final Words: Getting More From Your Travels
In times of rising prices and inflation, saving money while traveling is becoming increasingly valuable. That said, your credit score is a powerful tool to help you travel more strategically. You’ll be able to enjoy more experiences without breaking the bank. So well before your travels, ensure you’re keeping your credit score healthy by eliminating existing debts, lessening credit applications, and being responsible with paying off your bills.
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Happy travels!
Annick, The Common Traveler
Raised as a third culture kid living in South America and Europe, Annick caught the travel bug early. As an empty-nester, Annick enjoys sharing her tips for traveling for those with champagne taste and beer budgets.