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I bought a package of Cricut Printable Vinyl which I am planning to use to create a sticker for a mug that will be used to drink tea. 

I read online a design on printable vinyl can smudge or wear off if it gets wet. 

I am wondering if there is a way to protect my vinyl sticker, once on the tea mug, so the design does not come off? 

The design will not come in contact with the recipient's mouth in any way. 

I read online that you can use modge podge to seal/protect a vinyl sticker. Should I use that or is there something else that is better?

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So what you read is correct - the aqueos desktop printer ink can smudge. Also it can deteriorate if its paper based.

You can try a clear cold application laminate, like Oracal laminates sold at UScutter.  - Apply with a cold roll laminator, or other method.

I would do some tests yourself, and 10X dishwasher cycles to see how it holds up. 

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The problem with the aqueous printable vinyl is that the coating that allows it to be printable will eventually fail and flake off, even if laminated.

I have used clear/transparent Oracal 651 as a laminate in the past since it is normally cheaper than real laminate and available in smaller rolls. This will help protect the decal from scratches but won't really help much with UV protection. It's best to use pigment based inks instead of dye based to minimize fading.

I have had decals made like this last for over a year with minimal fading but eventually the coating turns to dust and everything falls apart.

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