Quick Tip: Does overspending with the credit card while traveling affect your credit score?

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Having a good credit score is essential to benefit from cheaper loans. Experts say that a credit score not only reflects a borrower’s creditworthiness, but is also a key part of their financial profile.

A borrower’s credit score indicates whether or not they have a strong credit history. This in turn allows lenders to decide whether or not to lend to these borrowers and at what rate.

It is easy for people with good credit scores to qualify for loans. However, a person with a bad credit rating finds it difficult to get a loan. Even if such a person obtains a loan, the applicable interest rate is generally higher for them than for people with good credit ratings.

Read also : Spending with a travel credit card this holiday season: key takeaways

It is important for every person to maintain a good credit history and a good credit rating. That said, various factors affect a borrower’s credit rating. One such factor affecting a person’s credit rating is overspending. Therefore, while spending with a credit card while traveling, overspending should be avoided.

Experts say overspending can have a temporary impact on a person’s credit rating. “Overspending can be a major setback regardless of credit and debit, and high credit limit usage can also lead to a temporary drop in CIBIL score,” says Gaurav Chopra, CEO and Founder of IndiaLends.

When planning a trip, it is good financial discipline to budget for miscellaneous expenses during the trip. Sometimes expenses cannot be avoided while traveling, so a credit card can be extremely helpful in providing that cushion.

Also read: How can your credit card help you reduce your travel expenses?

“However, one must assess their ability to repay credit card dues on time, as carrying balances on a credit card can be prohibitively expensive at 2.5% to 4% per month. It is often best to “opting for a lower cost personal loan to pay off high cost debt on a credit card and repay the lower cost personal loan at your convenience, says Chopra.


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