Using your credit card to fund your student holiday has its benefits, but it doesn’t come without some costs. Use this guide to weigh up whether you should pay for your next trip on plastic.
Organising a holiday can be expensive. In between saving for flights, accommodation, travel insurance and spending money, it’s easy for the costs to pile up. If you’re still studying, finding the funds to do this can only make things more difficult. This is where a credit card could come in.
While you shouldn’t charge your entire holiday to a credit card, there are a few ways that paying on plastic could help you manage your cash flow when organising your next trip. Use this guide to compare which cards are suitable for students booking their next holiday, the features to look out for and the mistakes to avoid.
How can I use a credit card to fund my holiday?
While you shouldn’t pay for your whole holiday on plastic, there are a few different ways you can use a credit card to help manage those travel costs. Whether you want to use your credit card to pay for flights, cover your accommodation or consolidate your post-holiday debt, you can compare some of your options below:
Before your holiday: Managing your prepaid expenses
When you’re planning a holiday, many of the costs come up before you even step on the plane. However, there are a few different credit cards on the Australian market that could help you cover some of these costs while racking up some extra benefits.
0% purchase rate credit cards
If you have some big-ticket purchases in mind, a credit card with a 0% purchase rate might help. 0% purchase rate offers can last anywhere from 3 to 15 months, meaning you can pay off your balance without accruing interest for as long as the promotional period lasts. If you’re trying to save your holiday spending money and organise your prepaid costs, a 0% purchase rate credit card could help you manage some of those on credit without the burden of interest. As these 0% rates are only in place for a set period, make sure you pay off the prepaid purchases before the promotion ends to avoid collecting interest when the revert rate sets in.
Comparison of 0% purchase rate credit cards
Cards with complimentary international travel insurance
When you plan an overseas holiday, travel insurance is another cost you’ll need to consider. This is where a credit card with complimentary insurance could come in handy. While some cards will require you to spend a percentage of your holiday costs (such as $500 for flights or accommodation) on the card to activate the policy, it could be a convenient way to receive insurance cover without the time and cost it takes to organise standalone travel insurance. The insurance is often eligible for up to six months worth of travel, though you’ll need to make sure you meet the eligibility requirements before you apply.
Comparison of credit cards with complimentary insurance covers
Student credit card
If you’re using a credit card for both everyday and holiday expenses while you’re studying, a student credit card could be another worthwhile option. Only available to applicants who are enrolled in full-time study, student credit cards usually come with lower credit limits, annual fees and interest rates. While they don’t usually offer the same level of features as top-tier cards, they can be a convenient way to manage your costs without the frills.
Comparison of student credit cards
During your holiday: Handling your travel budget
Now that your prepaid expenses are out of the way, it’s time to plan how you’ll manage your travel budget overseas. While you should have some savings to spend overseas, a credit card could be a useful way to balance out your travel budget between cash and credit. If you want to avoid racking up post-holiday debt, you might even want to consider just carrying a credit card in case of emergencies. Either way, you can compare some of your options below:
No foreign currency conversion fee credit card.
If you’re spending overseas, a regular credit card will quickly rack up foreign currency conversion fees when you pay in the local currency. If you plan to make regular purchases overseas on your credit card, a card with no foreign currency conversion fees can help you save on those costs. These cards generally come with higher annual fees, though, so you’ll want to make sure the interest savings outweigh the standard costs before you apply.
Comparison of no foreign currency conversion fee credit cards
Rewards credit card
If you’re planning to pay on plastic frequently throughout your holiday, you might want to increase the value you get from your purchases with a rewards credit card. These cards let you earn rewards points per $1 spent, which you can then redeem for flight rewards, travel packages, merchandise, cash back and more. Some cards even offer bonus points for purchases made overseas, which could come in handy on your trip. Again, these cards usually come with higher annual fees and interest rates, so don’t let the promise of rewards sway you. Instead, make sure you compare the other features, fees and costs involved before applying.
Comparison of rewards credit cards
Credit cards with purchase protection
Shopping with a credit card overseas can help you make more secure purchases. Many credit cards offer purchase protection cover, which can protect you from fraudulent transactions, replacement or a refund of the purchase price if an item is lost, damaged or stolen and extended warranty protection. In the case of an emergency, make sure you understand what you’re covered for under the policy and the contact details you’ll need to report an issue or make a claim.
Comparison of credit cards with purchase protection
After your holiday: Consolidating any post-holiday debts
In 2015, finder.com.au reported that more than 2 million travellers were hit with debt lag when they returned from their holiday. According to the survey, one in three Australians who used their credit card on holiday failed to pay off their accumulated debt, worth a total of $139 million, in time to avoid interest. So, while a credit card can be a useful way to manage your costs, it can also be an easy way to fall into debt if you’re not careful. If you have overspent and are struggling to pay off your post-holiday debt, it might be time to consider a balance transfer.
If you’re struggling to repay your holiday debt due to interest, a 0% balance transfer credit card could help you pay off your debt faster without the cost of interest. 0% balance transfer offers are only available for a promotional period and generally last from 6 to 20 months. When the promotional offer ends, a standard balance transfer interest rate will apply and your debt will continue to grow with interest. So if you really want to et your post-holiday debt under control, be sure to pay the debt off in full before the offer ends.
Comparison of balance transfer credit cards
For more tips, see our guide on how to use a credit card for your next holiday.
What are the benefits of using a credit card to fund your student holiday?
- Security of credit. Credit cards give you access to an emergency line of credit and their purchase protection features could give you extra peace of mind when shopping overseas.
- Travel-centric extras. Some credit cards offer extra features designed for frequent travellers including rewards programs, complimentary airline lounge access and included international travel insurance.
- Manage prepaid cash flow. Using a credit card to pay for expenses such as flights can free up your savings for incidental expenses and holiday spending.
- Debt consolidation tool. If you return from holiday with a debt, a balance transfer credit card can help you consolidate your balance in a credit card with 0% on balance transfers for a set period. Not only will you be able to pay off your debt quicker, but you can do so without the burden of interest.
What are the downfalls of using a credit card to fund your student holiday?
- Temptation to spend. Unlike when you’re spending to a budget with your debit card, a credit card can tempt you to spend more than you have. Remember that you have to repay everything you charge (plus interest) and stick to a budget whenever you can.
- Come with extra costs. Unlike a debit card, credit cards come with extra costs such as annual fees, interest charges and late payment fees.
- Shouldn’t be used for ATM withdrawals. Using your credit card at an ATM is considered a cash advance. Unfortunately, cash advances collect a higher interest rate and can also incur a cash advance fee. You might want to consider a debit card or prepaid travel card for withdrawals instead.
- Eligibility requirements. Credit cards also come with stricter eligibility requirements than debit cards or prepaid cards. This means you’ll need to meet a minimum income requirement, have a good credit history and meet the age restriction to receive approval.
How do I apply for a credit card to fund my student holiday?
If you’ve decided to use a credit card to fund your student holiday and have compared your options, you’ll need to make sure you meet the eligibility requirements and have prepared the necessary documents before you apply:
- Age. All Australian credit cards require cardholders to be at least 18 years old.
- Minimum income. Most credit cards come with a minimum income requirement. If you’re studying full-time, you might want to consider comparing low income credit cards (which usually start at around $15,000 p.a.) to ensure you meet the minimum requirement.
- Credit history. Credit card issuers require applicants to have a good credit history. If you’ve never had a credit card before, it’s likely that you’ll have no activity on your credit history. If this is the case, you might need to get in touch with the issuer directly to see if there are any other details you need to provide to improve your chances of approval if you don’t have a credit score.
- Residential status. Many credit cards require cardholders to be permanent Australian residents.
- Full-time enrolment. If you’re applying for a student credit card, you’ll need to be enrolled full-time at an eligible university, TAFE or other education institution.
- Proof of identity. You’ll need to provide proof of identity such as your birth certificate, passport or driver’s licence.
- Proof of income. You’ll need to include proof of income such as recent payslips, Centrelink payments and even student scholarships if relevant.
- Student information. You’ll need to also provide proof of your full-time enrolment.
- Co-signer. If you’ve never had a credit card, you might be required to have a co-signer when you sign up for the card. The co-signer is usually your parent or guardian and will be responsible for your debt if you’re unable to make repayments.
A credit card can come in handy whether you’re planning for your holiday, managing your travel spending budget or consolidating your post-holiday debt. However, it’s important to remember that you have to repay everything you charge and you don’t want to rack up debt and get your credit history off to a bad start while you’re still studying. Above all, be sure to compare your options and ensure you can afford the card before you apply.Back to top