Community Magazine October 2014

54 Community Magazine Yet, there’s a way to travel luxuriously without spending money excessively, and ironically, the solution lies in spending money. By being savvy with credit cards that offer great deals for points and travel miles, your regular expenditures on groceries, gas, housing, and tuition can pay for your vacation. Beware of the Credit Trap First, a few words of caution. Don’t be so naïve to think that credit card companies are offering glittering travel incentives because they altruistically want to send you on a great vacation. These companies make most of their money from charging interest on unpaid balances. They also profit from late fees, penalty fees for exceeding the credit limit, balance transfer fees, cash withdrawal fees, and often annual fees. Credit cards – or more fittingly “debt cards” – are preying on irresponsible card holders who spend beyond their means, maintain a balance and end up burdened with high interest rates and fees. For those who are unable to spend wisely and make payments on time, it is inadvisable to get into the credit card game, because the benefits of reward points will quickly be negated by paying fees and interest, and the card holder is likely to come out at a loss. To be fair, not all credit card companies are hoping to profit solely from the financial failure of their clientele. Companies like Visa and MasterCard charge merchants between 2-3.5 percent of every transaction, which comprises roughly 20 percent of their profit. American Express, whose users are unlikely to hold a balance, charges the highest merchant fees, garnering up to 65 percent of their revenue from merchants. In fact, the increase in merchant fees is largely responsible for the boost in generous credit card rewards. Nocreditcarddiscussionwouldbecompletewithoutunderstanding the relationship between credit cards and credit scores. The credit score, which determines a person’s worthiness for a loan, mortgage or credit card, as well as the interest rate charged, is calculated with a formula that takes into account five factors: payment history, credit utilization, length of credit history, new credit, and types of credit used. Yet, the first two considerations, payment history and credit utilization, are the most weighty, comprising 60 percent of your credit score. Many people are hesitant to sign up for new credit cards based on the assumption that it is detrimental to your credit score. But this is only partially true. A credit card company performs a credit pull for each new application, and each pull lowers a credit score by Getting to the Point Chaya Steinman Take a moment and imagine your ideal vacation. Whether you’re sipping something cold on a pristine beach, touring through ancient cities rich with history, or reveling in unique and exotic spots around the globe, the common denominator of any trip is the whopping bill you’re left with at the end. Just try to relax and enjoy your well-earned holiday while you’re spending loads of your well-earned money at every turn! With the costs of flights, lodging and car rentals, in addition to the price of the attractions, many dream vacations remain just that – a very expensive dream. Pay for your vacation with credit card rewards