Travel tips

What’s The Best Way To Pay For A Vacation?

Whether it’s a sight seeing tour through Europe, backpacking through a jungle, or sitting on a beach listening to the crashing ocean waves while wearing your costa del mar sunglasses, everyone has their idea of the perfect vacation. Just as people’s idea of a perfect vacation vary, so do their view on the best way to pay for it. What is the best way to pay for a vacation?

The traditional method is to save money out of a weekly or monthly budget until enough is saved to book a vacation. But there are other ways to pay for your vacation including paying the travel agency in installments, or even using credit.

Saving Up

Saving up is the traditional method to pay for a vacation. One sets aside money each week or month for a future vacation.  One enough has been saved, the traveler books the vacation paying in full.

Advantages

• Pay In Full: Paying in full gives you the piece of mind your vacation is taken care of, and all you have to do is show up and have fun.
• Discounts: Sometimes discounts are given to customers that pay in full at the time of booking.
• Budget Flexibility: The money normally targeted towards the vacation can be used for unexpected expenses

Disadvantages

• Can’t Take Advantage of Sales: Any sales occurring during the saving stage will have to be ignored, regardless of how good they may be.
• Longer Lead Time: Saving in full for a vacation will mean you wait long to go on your actual trip. First there’s the saving’s period, then once you book a trip it will then be some amount of time in the future from that point.

Travel Agency Installment Plan

A deposit is given at the time of booking. This deposit may be a percentage of the vacation’s total cost, or it may be simply a random low number to encourage people to take advantage of the program. The balance of the vacation is made over time as the date of the vacation approaches.

Advantages

• Low Deposit : The biggest advantage is obviously the fact that one only needs a fraction of the vacation’s cost to book it.
• Pay Over Time: A traveler can alter their budget to pay the installments over time. It helps a person spread out the cost of a vacation over time.
• Take Advantage of Sales: The vacation by installment structure allows travelers to take advantage of unexpected promotional offers when they don’t have the full cost of the vacation saved currently.
• No Interest: Installment vacations allow a traveler to pay the cost over time interest free.

Disadvantages

• Budget Change: The vacation installment represents a new periodic expense for the customer. The traveler may have issues adjusting to having less discretionary funds in their budget.
• Forfeiture of Funds If any of the installments are missed, the traveler may be in danger of forfeiting all funds paid up until that point

Credit

One could pay for their vacation using credit in the form of a credit card or even a personal loan taken out explicitly for the vacation.

Advantages

• Book Anytime: As long as you have enough credit, you can book a vacation anytime you want.
• Promotional Offers: Credit allows a vacation to be booked at a moment’s notice (as long as you have enough available credit), allowing travelers to take advantage of promotional offers.
• Flexible Repayment: When using credit, the traveler has more options as to how long they want to take in paying off the vacation. Installment loans have can be setup to be repaid over years or if a credit card was used, one could pay it off as fast or as slow as they’d like as long as the minimum payment is made.

Disadvantages

• Interest: This disadvantage is so big, it’s really the only one worth mentioning. Using credit to pay for a vacation locks a traveler in to paying interest, increasing the actual cost of the vacation. In the case of a credit card, if only the minimum payment is made it could take literally years to pay off a vacation.

Advantages and disadvantages exist both methods of paying for a vacation. It really comes down to which style best fits your personal finance style and gives you the best chance for success.

How about you Clever Friends, which method do you prefer to pay for a vacation?

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