How to Finance a Summer Vacation

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Breaking up the cost of your vacation can relieve your family budget from paying for your fun in the sun all at once. Options for vacation payment plans include credit cards, personal loans and personal lines of credit.

Plastic Fantastic: Use Credit Cards to Spread Out Vacation Costs

When planning and paying for your vacation, credit cards are likely to play a role. Hotels and car rental agencies are examples of vendors that require a credit card for reserving your room or vehicle rental. You may also gain mileage rewards if you use a credit card for charging certain travel expenses, but this benefit is available only if you use a credit card that offers mileage credits. Check with credit card companies offering mileage rewards for details, as programs vary.

Credit card companies typically offer cardholder protection in the event your card is lost or stolen, or goods and services purchased are misrepresented. Again, card issuer programs vary. It’s best to clarify buyer protection benefits before heading out on a beach-front shopping spree.

You can use multiple credit cards to track expenses; for example, use a card with mileage benefits for airline tickets, use a card with cash back benefits for shopping, and keep business and vacation expenses separate by using business and personal credit cards. When planning how you’ll use credit cards for your vacation, it’s important to consider the annual percentage rate (APR) for each card and benefits offered. The Consumer Financial Protection Bureau notes that the APR includes lender fees and charges, as well as the interest rate for your card. You can find the APR for each card on monthly statements and credit card applications.

The Federal Trade Commission cautions consumers against paying extra for “credit card loss protection,” as consumer liability is typically limited to $50 in the event a credit card is lost or stolen.

Vacation Payment Plans: Personal Loans and Lines of Credit

Taking out a personal loan or line of credit provides a convenient way to spread out payments for vacation expenses. Personal loans are available for specific amounts with a structured repayment schedule. Personal loans are typically available with fixed interest rates. Personal lines of credit work differently than personal loans. You’re offered a personal credit line and can draw against it as needed up to your available credit line. This option can be a great option for unexpected expenses, or if you want to track vacation expenses with a dedicated credit line. Personal lines of credit usually carry variable interest rates. You pay interest only on charges made and your payments vary based on how much credit you use. Personal loans and lines of credit are unsecured, which means that you’ll pay higher interest than for secured loans such as mortgages and vehicle loans.

Things to Know

Credit cards and loans can help you spread out vacation costs, but the convenience of using cards can easily lead to overspending. Setting spending limits before you leave on vacation can help with keeping your budget intact. If more than one family member will be using credit cards, keep track of all spending to avoid surprises later.

If you’re in college and planning to have a blast during spring, summer and winter breaks, make sure it’s not your credit doesn’t suffer a meltdown. You can damage your credit by maxing out your cards or not being able to make minimum payments when they’re due. A few days of fun in the sun isn’t worth the consequences of bad credit. Before buying pizza for all your buddies on spring break, ask yourself if paying the bill for several months is really worth it.

Credit issuers and lenders offer a variety of terms and conditions for cards and loans. It’s worthwhile to shop and compare credit card offers before deciding which cards are best to use for your vacation payment plans.

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