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
The only thing more difficult than deciding
where to go on vacation may be paying for the trip.
As of November, Americans carried a record consumer debt of $2 trillion, according to the Federal Reserve. That figure doesn't include
home mortgages, but it does include credit card debt, auto loans and financing such
purchases as travel.
Yet travel companies are increasingly offering financing
options for their products, partly as a way to boost their profit.
"All the trends indicate that the leisure and travel
industries are more than ever dependent on revolving credit," says Robert D. Manning,
an expert on the credit card industry and a business professor at Rochester Institute
of Technology in New York.
The offerings are tempting. Take Carnival Cruises'
"Fun Finance Plan." Carnival issues you a Capital One MasterCard to finance your
trip. You can take a three-day "Fun Ship" cruise, starting at $299, and pay as little
as $14 a month for 24 months, the ads on Carnival's website say.
It sounds like a great deal, and on the surface,
it is not bad. If you make your $14 payments on time, after two
years you will have
paid $336 for your cruise, a markup of just $37.
What is not included in those calculations (but
is available from a Carnival customer service rep) is the information that even
the best customers,
who qualify for the lowest 9.9% interest rate, must pay a monthly
fee of $4. During the two-year payoff period, that tacks on $96. Now your $299 cruise
has cost you $432.
And if you are a greater credit risk, your interest
rate doubles to 19.8% and your monthly fee is $6. Your $299 cruise is now $517.
Let's say you have less-than-stellar credit and
qualify only for the highest interest rates and fees for your cruise. Maybe you
have other revolving credit. Let's say that twice a year you're late for a total
of four late fees in two years. At $30 per late fee, tack on $120 and that $299
cruise costs $637 - assuming you pay it off in two years.
