There’s always a need to be as creative as possible when it comes to making your money stretch as a digital nomad. You want to be able to trade in a currency that will increase your purchasing power, so you can enjoy the quality of life that you are after whilst travelling.
One of the ways you can do this is by leveraging the reward systems that different credit card providers offer. I personally signed up to one a couple of years ago and can see the benefit if it is done in the right way. However, the wrong program can also set you back financially, while it makes you think that you are gaining financially.
In this post, I want to share some insights that you should look for so you can benefit from credit card use while travelling as a digital nomad.
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My own experience.
I have a credit card rewards program with Australia’s Commonwealth Bank. The program is okay, but there are others that are better than it.
The program allows you to gain points, which you can use as cash towards travel, experiences or even a cash refund. My wife and I had actually planned to put the accumulated credit towards a cruise holiday that we wanted to take.
My strategy was the following.
Process any charges through an online payment system.
This could see accommodation charged through Airbnb, travel through online booking services, groceries and entertainment also through online booking systems. The key was to never pay cash.
Settle the balance at the end of the month.
At the end of the month, I would receive a statement advising me of the amount to settle and then I would settle everything in full.
The income that was using was actually the revenue from my business. I also ran any business costs on the card. Since one of my business’s is in client services, I would simply wait for them to settle their invoice and I would clear the debt. As long as I had clients pay their bills, I would accumulate the points.
For a long time, I thought I was actually getting ahead with the credit card program. But I was actually losing out despite implementing what I thought was a clever strategy.
I was losing out on the per transaction fee.
Every month I would go through my credit card statement to find several per transaction fees. Some of the fees were quite high if payments were conducted in the hundreds or thousands.
It is easy to fall behind with creditors.
I’m fortunate that I run a business that has a positive cashflow. However, there were several occasions when I received ‘surprising credit balances’ that I had to settle. If I did not have my business or my cashflow management skill, I would have fallen behind and become one of the victims of the credit trap.
It’s really important to stay within your means and to only use a credit amount that you can actually afford.
The rewards program didn’t give me as much spending power as I’d hoped for.
It’s important to know what you want to get out of the program in the beginning. In my case, I’ve accumulated over 100,000 points which gets approximately $500 AUD in rewards and travel vouchers. Something is better than nothing. But considering that the calculation is based on 1-2 points per dollar spent, it means that I could have forgone the transaction and annual fees (the annual fee is $150-200 annually) and purchased the rewards item directly.
Access to cash advances.
This is something that was handy for me when there were times I needed to get access to cash in a local currency, but I wasn’t able to use my debit card. This is because sometimes, the card would get blocked when travelling to a different country and the ATMs wouldn’t recognize or accept withdrawing cash. (This happened to me several times in Europe and especially in Spain).
I was able to use my credit card to withdraw emergency cash from local ATMs to help me fund my travels. There were a couple of setbacks using a cash advance from a credit card.
- Rewards points weren’t collected on cash advances.
- There was a different fee structure for cash advances taken out on credit cards.
I’ve heard that credit cards and the companies that assess your credit score don’t like it when people use cash advances on their credit cards.
An alternative to this is to plan your budgets and get a cash advance from a loan provider (ideally not a bank, but a provider that can give you a good short-term deal for your digital nomad travels, and if you need access to emergency cash.)
Start by comparing options to see how you can get cash advances online with the best loan suppliers and providers.
At the time, I would withdraw in batches of $100-300. It is possible to get a cash advance of up to $5000.
Are there other options that you should consider?
Definitely! I’m always looking out for alternative options and from what I’ve seen, alot does come down to the type of reward that you want to have. In the case of digital nomads, accumulating rewards for travel fares is interesting.
If enough points can be racked up to gain a one-way or return ticket to a destination annually, that will help ease the financial strain while travelling as a digital nomad.
Velocity is one of the interesting ones, however I’m not 100% convinced with their offer as to seems to put the credit card holders at a breakeven. Their offer requires the holders to pay an annual fee and in return, they will get a couple of flights a year and access to the Virgin Lounge. Points can be gained for travel, which can then discount their rates by booking directly on their website
That being said, you can easily find cheap fares by looking on Sky Scanner. But if you do find that you need to use a card frequently, then this is a handy one to have.
The Qantas reward program is also interesting for frequent flyers. They offer an interesting proposition by gaining up to 100,000 rewards points if a certain spend is achieved in the first three months. This is enough to earn you a return ticket from Australia to Europe or the US. So it is actually quite interesting.
As with the Virgin velocity rewards, you aren’t always going to get cheaper fares. But if you do need to use a credit card, then this one can be a handy option.
There are a few useful resources that I recommend checking out.
Make sure you check those programs that are ideal for the country that you are a resident in and find out how the program works. Don’t commit to anything that you are unsure about.
If you have any experience using credit cards whilst travelling as a digital nomad, please leave your comments below.
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