I found this article in TIME and wanted to share.
Vacation Spending: Credit or Debit? By MARTHA C. WHITE | July 16, 2012
Packing for vacation inevitably involves some decision making: Do I bring extra sunglasses? Flip flops or sandals? But a more important question is whether you should use a credit or debit card for vacation spending. Debit cards, of course, prevent you from overspending and running up debt. But if you have the discipline to stick to a budget on your getaway, a credit card is the way to go, for several reasons.
For one thing, hotels and rental car companies put a hold on your card, sometimes exceeding the amount of your reservation buy hundreds of dollars. If this hold goes on your credit card line, it doesn’t really affect you. A hold placed on your debit card, however, can essentially freeze those funds for up to several days.Travelers tell horror stories of vacations ruined because they couldn’t buy meals or visit attractions because of a hold that was locking up their money.
Second, if you’re unlucky enough to have your wallet is stolen or account compromised, dealing with fraudulent charges is a lot less hassle with a credit card. The process of investigating and finding you not liable for unauthorized charges is the same, but — like those holds some travel providers place on a card — you could be deprived of your money until the investigation is resolved. Fraudulent charges to a credit line, on the other hand, are less likely to affect your day-to-day spending.
I’m not advocating financing your vacation with long-term debt. If you saved up for your vacation and are in a position to use a debit card, you could use a credit card instead and simply pay off your bill before the charges start accruing interest. As a bonus, vacation spending can be a great way to rack up rewards on your credit card. Some cards offer enhanced rewards for travel, restaurant and/or various entertainment purchases. The issuer may require you to sign up in advance to participate in these bonus rewards programs, so check before you leave.
Some credit cards also offer benefits and protection you can’t get with a debit card. In particular, travel rewards cards may offer perks like access to airline lounges, travel insurance or reimbursement you for checked bag fees or lost baggage. If you’re traveling overseas, some credit cards waive foreign transaction fees, which saves you roughly 3% on every purchase — maybe enough to splurge on a few extra souvenirs.