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Vacation Budgeting: How to Budget for a Vacation

Tips for using credit cards for your vacation without incurring debt.

Even at Consolidated Credit, we understand that it’s tough to take a convenient vacation these days without using credit cards. Reservations for flights and accommodations are easier with credit; you also need a valid credit card to rent a car or you must pay a deposit. Plus, when you’re on the trip, carry plastic is often safer and more convenient than using cash.

Narrator: Don’t let vacation plans turn into vacation debt. Learn to be Penny Wise with your next vacation budget

[On-screen text] Be Penny Wise Not Pound Foolish: Vacation Budgeting

Narrator: If the biggest memento you bring home from vacation is a pile of bills, it’s hardly going to be a relaxing escape that you wanted. But Penny Wise vacationers plan ahead, so they end every vacation with good memories instead of debt. Here’s how Penny Wise avoid the debt that Pound Foolish vacationers usually bring home.

[On-screen text] Plan for the Trip You Want

Narrator: A debt free vacation starts with a solid vacation plan. When you’re Pound Foolish you don’t plan ahead to decide what kind trip you want. So, you end up paying for a ton of activities in a package when all you want to do is relax. OR you pay a-la-carte when a package would’ve been cheaper. Penny Wise talks about the trip in advance with everyone who’s going, so everyone gets at least a little bit of what they want.

[On-screen text] Establish Spending Expectations

Narrator: And because Penny Wise vacationers plan ahead for the perfect trip, they also have time to plan out how much they’ll spend. They research the destination and set target goals for daily spending. So, they can balance more expensive activities with cheaper or free events to keep the cost down daily and overall.

[On-screen text] Save Up, Even If You Will Use Credit.

Narrator: Vacation expenses often end up on credit cards, which makes it easy for these costs to turn into debt. If you’re Pound Foolish, you don’t bother saving for a vacation, because it’s just easier to use credit cards. As a result, you charge everything from reservations to incidentals on high interest rate credit cards. Penny Wise saves in advance. Even if they use plastic for reservations on the trip, they pay off vacation debts as soon as possible. So, they don’t come home to bills.

[On-screen text] Create a Vacation Fund

Narrator: That means Penny Wise creates a vacation fund. They set aside a little money out of every paycheck to cover expenses.

[On-screen text] Pound Foolish Travels at Peak Times.

Narrator: Pound Foolish vacationers take vacations at the same time as everyone else every year. So, they end up traveling at peak times, even when everything from air travel to accommodations and activities is much more expensive. And, they have to fight crowds and don’t get the best service, because the staff is usually overworked. Penny Wise travels at off-peak times, because they’re not only cheaper, but they’re less crowdedcost-effectiveand you get better service.

When it comes to accommodations, you have to be Pound Foolish to take the first offer you find online. When Penny Wise finds a hotel they like on a comparison website, they take the extra step of calling the hotel directly to ask about additional discounts or deals. And, while they may search high and low for the best deal, they know only to enter credit card information on a secure website to prevent identity theft.

Pound Foolish vacationers only pick full-service resorts or expensive hotel chains, unlike Penny Wise who’s willing to get creative in order to save big on accommodations. They consider all the options, from hostels to campsites at National Parks, to suites and condos with kitchenettes that help you cut your vacation food budget.

And, they even consider options like home swaps, where you stay in someone else’s home in exchange for opening up yours. Sites like and have established reputations as exchange networks. And while home swaps aren’t for everyone, only Pound Foolish rules it out before looking into it or looking at other options that can help them vacation for less.

Penny Wise even looks into things like volunteer vacations, where you get a trip of a lifetime opportunity, like a rainforest expedition to Costa Rica or elephant sanctuaries in Namibia.  You’ll have to work and you may stay in less luxurious accommodations, but you’ll travel for less and you can make a difference.

Finally, when Pound Foolish gets to a destination, they just check in and head straight for their room. But Penny Wise spends a few extra minutes at the desk to ask some additional questions, like if it’s possible to earn frequent flier miles or travel rewards for the stay since most hotel chains and independent establishments participate in at least one rewards program.

And speaking of rewards, Penny Wise is smart about getting it right and getting the right travel credit cards, since some allow you to use miles or points to stay places free.

For more Penny Wise tips, visit

[On-screen text] Consolidated Credit: When debt is the problem, we are the solution. Call 1-888-995-0737,

So, how are you supposed to avoid vacation debt if vacation costs are easier on plastic? The answer is that you save up in advance and plan strategically about which cards you use. Here are some tips:

Charges can be interest-free if you pay them within one billing cycle

To make this work, you must use a credit card that starts a billing cycle with a zero balance. Then you make charges throughout the billing cycle. At the end, you pay the balance off in-full by the due date. If you do this, you don’t incur any interest charges on those transactions.

So, let’s say you want to book your flights. The earlier you book a flight, the lower the cost. So, let’s say you start six months early. You save money from a few paychecks as you research flights. Then you book the tickets on a travel rewards credit card that started the billing cycle with a zero balance. You pay the reservations off in-full within one billing cycle to maximize your reward and eliminate interest charges.

If you repeat this process gradually, moving on next to your accommodations, you can use credit to make reservations without incurring debt. The same works on your trip. Take a credit card that has a zero balance, make purchases during your trip, then pay it off that billing cycle. That’s how you use credit without incurring vacation debt.

Don’t use travel miles unless it’s worth it

Frequent flier miles have cash value – it’s about one to two cents, but it’s still something. Most programs require you to use 25,000 miles minimum to purchase a ticket. That means the value of what you use, at minimum is $250.

So, in order to get the value out of your miles, you should only use them to purchase a ticket that’s worth more than $250. Otherwise, you’re basically wasting your miles.

When choosing a travel rewards credit card, always go for the least restrictions

If you don’t, you can end up being forced to use miles to avoid their expiration date. It’s also a hassle to book around seat and flight restrictions. A card that doesn’t have these restrictions is more likely to be used effectively.

Also, keep in mind that transaction restrictions limit you, too. It’s better to get a rewards credit card that offers miles on a greater variety of purchases. This way, you can earn miles faster and use them to save more.

Just be aware that the best travel rewards often come with higher APR

Credit cards that offer more rewards tend to have higher interest rate ranges. Even with a good credit score, a great travel rewards card with the least restrictions may have APR over 20%. This makes the first tip even more important. You must pay off charges quickly to avoid offsetting your rewards with interest charges. That typically happens within the first two billing cycles if you don’t pay off the debt in the first.

For more vacation budgeting tips, visit Consolidated Credit’s Debt-Free Vacation Guide.

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