by Katerina Nikolas

Created on: June 22, 2010

Almost everyone loves the thought of a vacation away. You may be entitled to take a vacation from work, but taking a vacation away is not an entitlement: it is a luxury which could end up costing you dearly if you need to fund it on credit. Paying for the cost of your vacation travel and accommodation, or package, by credit card, has many advantages. However if you don’t have the actual funds to cover the cost it is a risky business.

If you cannot afford to pay for your vacation and choose to put it on plastic, you could well be risking your future financial security. Vacations can be expensive, and if you were to return to find that you no longer have the job you had when you left, or an emergency leaves you short of money, you could find that the cost of the vacation has put you into debt which you cannot repay.

Any emergency could leave you struggling to pay the minimum on your credit card, whilst accruing high interest charges which you never anticipated when booking the vacation. Even worse, the vacation could turn out to be an unmitigated disaster which you have no wish to remember, but you can’t forget about it as the monthly statements keep it in the forefront of your thoughts.

Sensible, and yes boring, financial common sense says you don’t take a vacation unless you have the money to pay for it, otherwise it is going to cost you far more than its actual price when the interest is added. The sensible approach is to save your money for a vacation, even if it means missing a year, and accrue interest on your savings.

When it comes time to pay for your vacation then you can put it on plastic to take advantage of any built in travel insurance, which may well mean there is no need for you to purchase additional travel insurance. Then you can simply repay the balance in full when it falls due, knowing you can enjoy your vacation without any stress about its costs.

If you travel abroad your credit cards may not be welcome everywhere, but using them on a daily basis would be an expensive means of managing your holiday spending money, as foreign transaction fees are generally charged at high rates. Research some other way of obtaining cash abroad, rather than popping your plastic into an ATM, as charges are levied from the moment you withdraw any cash. One solution to this of course is to prepay your credit card before you depart, so you can still enjoy the convenience of using it without accruing charges.

If your credit card does offer you an additional 90 day insurance cover on purchases then it does make sense to use it to fund purchases which may end up broken in transit, or are stolen. However spending on a whim without the funds to cover the purchase has been the downfall of many who struggle with debt, so pre plan before your departure exactly how much you are prepared to spend on souvenirs or spontaneous purchases, or on wining and dining.

Whenever you plan a vacation plan a spending budget to complement it, allowing yourself so much a day. This way you ensure that costs do not spiral out of control. Sticking to mainly cash purchases for meals, trips and general spending prevents your spending running out of your control.

It may sound dull when you see your vacation as a time to let your hair down and do exactly as you like, but if you finance the whole adventure on credit you will struggle to repay all you are doing is effectively depriving yourself of income for the rest of the year. How much more enjoyable to return from your vacation with the only financial concern about your holiday is saving up for the next one.

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