Three out of four Americans pay for their vacations with credit cards. Credit cards offer convenience in tracking spending and having financial security while traveling. They provide a statement showing where money was spent and are safer than carrying cash.
The number one consideration for choosing a vacation destination is affordability. Before you give in to the convenience of paying for your travel, hotel, entertainment and food with your credit card, learn how to stay out of debt.
Vacations plans differ in price, but the average American vacation costs nearly $2,000 for travel and accommodations. Reserving flights and hotels with a credit card is the most preferred method of payment, for both sellers and consumers.
Of those three credit card vacationers, at least one will take more than three months to repay the charges on the card. Meet John P. Creditcardholder. He is in specific danger of spending more than he can afford. How?
The Package
John found a perfect vacation package for his family. Four days and three nights in a resort and air fare is $1,800. He secures the reservation with his credit card, knowing he can spend $470 per month for the next four months without straining his budget. Or can he?
The Extras
When the plane lands, John and his family take the shuttle to the resort. His wife wants to shop. To save on cab fare, John rents a car and hands his credit card to his wife for the day. He has now spent another $400 before she buys anything.
When she gets back to the hotel, she has spent $300 on souvenirs and $50 on food and snacks for herself and the children. The family goes out to dinner and a show for $120. Before nightfall, John's affordable vacation sports a price tag of $2,670.
Incidentals
The next two days are spent inside the resort and have a meager price tag of just over $200, spent on food and small purchases, like souvenirs and items the family forgot to pack. The resort has quietly charged his credit card, for the twelve telephone calls his daughter made back home, an additional $24. As well, they add taxes, booking fees and concierge gratuity of $170.46.
Time to go Home
Before returning the rental car, John takes the family to see some local sights, out to lunch, on a tour and to a museum for a total of $180. He fills the car with gas for $25 and returns to the rental center. He has gone over the mileage limit and pays an additional $40 for the car.
Restful Vacation?
John comes home rested, feeling like he has pulled off the perfect, budget-minded vacation. Then the credit card statement arrives. He can hardly believe the total for an $1,800 vacation. His total charges are $3,400. He cannot pay it off in four months, the way he had planned.
He was going to stretch the budget to pay $470 for four months for the vacation. He cannot do it for more than four months. He can really only consistently pay $420 per month. Now, he will pay nine months to pay off his vacation and the interest.
Not Me!
Want to avoid John's mistakes? Finance your vacation in advance or cut vacation expenses altogether using these tips:
~ Negotiate a vacation loan with your bank. Interest rates will be significantly lower than credit card interest rates. Many loans can have a debit card added, making the funds available as though on a credit card.
~ Purchase a no-fee credit card sponsored gift card. Before the vacation, pay each month to increase the balance available. Use this for incidental purchases.
~ Purchase a traveler's check card. Similar to paper traveler's checks, you deposit money onto the card to be used as a credit card. Use this for extra expenses.
~ Inclusive packages may seem more expensive at first glance. Add the charges you would spend on food and entertainment to your travel package to gauge the real savings.
~ Invest in a digital camera rather than paying for tourist souvenirs. Create memories and archive the photographs each day rather than buying something in each gift shop. Give photo enlargements or scrapbook photos as souvenirs to friends and family.
~ Cut the distance you travel. Find a vacation spot offering similar attractions closer to where you live. When possible, cut air fare from your vacation.
~ Travel with friends or family. Share the expense of subletting a time share, house or condo rather than staying in a hotel. Buy groceries and prepare meals in the house rather than eating out. Get group discounts when visiting attractions. Pay with a check or cash when possible.
~ Cut your food budget by packing snacks and water for day trips rather than buying with a credit card through a restaurant, convenience store or drive-through.