Travel credit cards for students and backpackers

When we think about travel credit cards, we tend to think of fancy airport lounges and frequent flyer miles. For some travellers, namely those on budgets like students and backpackers, what you’re looking for in a travel credit card might actually be a little bit different.

As much as we’d all love to travel regularly enough to earn the miles for business class upgrades, or to have enough rewards points to fly to London for free, many of us go the thriftier route when we travel. 

But where do you start? Can you just use your ordinary credit card? Will you be stuck with this credit card forever? What does this mean for your credit score? Never fear! We’ve got all your questions answered (and maybe a few more).

Let’s answer the biggest question of all: do I even need a credit card if I’m trying to be a thrifty traveller? The answer is, not necessarily. But depending on your travel plans, you might. 

Since a credit card uses borrowed money, it is very different from a prepaid travel card - which may be a better option if you really want to cut costs. There are many options which allow you to carry multiple currencies on the one prepaid card, and they’re a useful tool in any travel wallet. 

A credit card could come in handy for many occasions, such as:

• Travelling for a long time period
• Travelling with an unknown return date
• Leaving a deposit with a rental company
• Providing travel insurance in certain circumstances
• Emergencies (medical and otherwise)
• Larger expenses (flights, transport, etc)
• Souvenirs

In general, a credit card will allow you a bit more security should anything go wrong, and add greater flexibility to your travel arsenal. For a short trip, they may not be a necessity, but they can definitely lend a helping hand.

There are a lot of things travel credit cards will try to win you over with. These can include:

• Points - Points are helpful if you’re travelling a lot and spending big, but aren’t necessarily budget-friendly. These cards tend to have hefty price tags attached to them - the average annual fee for a rewards credit card in the Mozo database is $217. 

• No annual fee/low annual fee - Credit cards with no annual fee, or an otherwise low annual fee, can help keep prices down overall. If you have a very low budget and are committed to paying off your credit card bill each month, avoiding an annual fee could be your best option.

• Low interest rate - If you’re planning on putting some bigger expenses on your card (like plane tickets or car rentals), you may want to pick a card with a low interest rate. You may have to pay an annual fee, but you’ll save in the long run on interest if you have any balance left on your card. For a more in-depth explanation, see our guide to credit card interest.

• No foreign exchange margin - The foreign exchange margin is the fee you pay on top of a currency exchange every time you use your card overseas. It’s usually calculated as a percentage of the amount being spent, from roughly 1.5% to 3.65%. Some cards set up for travel have no foreign exchange margins, which makes them a useful option.

• Perks - Travelling on a budget can be a less than glamorous experience, so it’s nice to get some perks from your credit card. This can mean complimentary travel insurances, access to airport lounges (for some filling up at the buffet or sneaking in a shower on a long haul journey), or free nights in hotels.

If you’re travelling on a budget, it’s not all about the benefits - it’s also about making sure you don’t fall into any traps. Here are some things to watch out for with travel credit cards:

• Introductory offers - We love an introductory offer that gives you a reduced rate or a waived fee, but it’s important to watch out for when the offers end. If you’ve picked a card that offers a 0% p.a. interest rate for 6 months before switching over to 19.99% p.a., you don’t want to get stuck paying a higher rate while you’re in the middle of an expensive trip.

• Paper statement fees - These aren’t just a trap for travel credit cards, but also just something to watch for with credit cards! Some cards will send out paper statements by default and charge a small fee for the privilege, even though you will often be able to opt for digital statements only via your online account. Since you won’t be at home, there’s no use paying for those paper statements you aren’t receiving!

• Rewards caps and expiries - If you do opt for a card that gives rewards points, make sure to read up on their points earning rate. Some rewards cards cap the points that you can earn after a certain amount, or switch you to a lower rate of earning, meaning you could potentially be spending money without earning maximum points. Other cards have points which expire, so you can end up paying for rewards you don’t end up using.

• Cash advance rates and ATM fees - Credit cards will charge you a higher rate for any cash that you withdraw, or transfer over into another account. There’s also no interest-free period on cash, so this should be avoided if you want to keep costs low. Add to this the varying costs of international ATMs, and you could end up paying much more than you bargained for.

• Dynamic currency conversion - Have you ever seen the screen on a payment terminal which asks if you’d like to pay in the local currency or in AUD? If you choose to pay in Aussie dollars, you’ll also pay for something called Dynamic Currency Conversion, which can be between 5%-15% on top of any Foreign Exchange Margin already charged by your card.

Which travel credit card suits you best will come down to your own personal circumstances and knowing your own situation.

For example, say you’re off to Europe on a five month trip. You want to take a credit card because you’ll be flying and catching trains around while you’re there, but also renting cars in more remote areas - or maybe a Vespa down the Amalfi coast? Your budget is pretty tight, because you’ve spent all your money on accommodation and round-the-world flights already. Which card do you go with?

• a) The Low Rate Card. You know you’re not going to have the money to pay off big expenses at the end of each billing cycle, and you don’t want to pay high interest on the balance that is sure to be left over from those unavoidable expenses.

• b) The Low Fee Card. You’ve saved up for this trip really diligently, or will be getting paid while you are away, and are planning on paying your card off in full as you go. This credit card is really for emergencies, and you don’t want to pay a big annual fee for that.

• c) The Rewards card. Sure, you’re on a budget, but you booked all of your flights on this card to maximise your points and now you’ve got lounge access at the airport and fast-tracked check in and you don’t have to buy extra travel insurance (just make sure to read the PDS). Worth it.

And the answer is: whichever of these scenarios sounds most like you! 

So get ready to read the fine print, sort out your worldwide wallet, and hit that tarmac.

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