Travel
PAYING FOR YOUR TRIP Pay-later vacations drive up expenses. Even the lowest rates push up costs. And watch for hidden fees.
by
James Gilden
Special to The Times
February 1, 2004
Most credit cards require payment of only 2% of the new balance each month. Thus,
your first month's minimum payment on your $299 cruise would only be about $6 plus
the $4 monthly fee. Paying only the minimum payment each month can stretch your
payments from two to more than 10 years when you add interest (nearly $2.50 per
month to begin with at 9.9%; $5 per month at 19.8%).
With interest and monthly fees, you could end up paying more than $1,000 for your
$299 cruise.
If you are considering adding to existing consumer debt to finance your next vacation,
Manning, author of "Credit Card Nation: The Consequences of America's Addiction
to Credit," suggests you have a plan to repay it more quickly.
On his website, http://www.creditcardnation.com , he has created a tool called the
Debt Zapper that can calculate how long it will take to repay a trip.
Experts who counsel consumers who have sunk into debt suggest restraint when it
comes to financing a vacation.
"What is a vacation?" asks Howard S. Dvorkin, president and founder of Consolidated
Credit Counseling Services Inc., a nonprofit debt-management organization. "Spending
time away from work with people you like. You don't have to spend big money to have
a good time."
He suggests day trips or other less-expensive vacations.
"You don't have to spend $5,000 on a vacation to have a vacation," he says.
If you want to take an elaborate trip, start a separate vacation savings account
and have $50 or $100 per paycheck deposited directly into the account.
If you must finance a vacation, use the lowest-rate card you can find. Even then,
you need to read the fine print because some have low teaser rates that increase.
And always pay more than the minimum payment.
"Is it smart to finance a vacation? No," he says. "No matter what the [vacation]
deal is that you're getting, after you add interest, it's not such a deal."
