Vacations with Debt

[Disneyliscious]

NO- and here is why-
I'm not knocking anyone down here...and as a pp said,I'm not wealthy,or perfect..etc etc But I spent some time today with my 11 yo child,who asked me the difference between a credit card and a debit card. (or bank account) since I wanted him to understand what a cc is,I explained things this way.
Say I have a cc- and on Jan. 1st,I buy a big screen tv with the card. Now, using that card,is like a loan from citibank,and it comes due in ONE MONTH. So,it's not my money I'm using,I'm borrowing from them,see?
on Feb. 1st,the bill arrives and is due- however,I only have 600.00- so I pay them that. (so happy for them!) NOW I still owe them 400.00....and here we go with a finance charge....if it's 10%,I now owe 440.00....
(trying make simple explanation)
On Feb 29,I buy a surround sound system for 1000.00 to match my tv.
On March 1st, the bill is due,loan SHOULD be paid off. HOWEVER,I only have 800.00 this month- so,I owe 1440.00,and pay 800.00...which leaves a balance of 640.00....at 10% in. it is now 704.00....
*question to child- am I using my own money here?
child says "NO!"
B/C it's not mine,it's a loan,and if I am borrowing more than I can pay off IN FULL in 30 days,then I HAVE NO EXTRA.doesn't matter how I allocate/stash more cash,I can't pay off my current loan.

Is it wise to do this? I think my 11 yo got the right answer really quickly.
Do people do it anyway? ALL the time!
and that's why I vote 'no' to the OP's question,I wouldn't.
From a SAHM parent,single income home,just ordinary working folks

I get what you are saying, but its not logical to think someone can pay a $600 a month payment on a TV that cost $1k. In that situation, I think most folks would save the $600 one month + the $800 the next month. Buy the TV with cash and have $400 to pay towards the stereo system. I know you are just using random figures to get your point across so Im not picking on you. Im just saying that most folks with credit card debt probably dont make $600 a month cc payments (or 60% of their cc balance). That does not mean they are "drowning".

Also, many places offer 12/18/24 months no interest. Ive seen furniture stores offer 4 years with no interest. Just because someone owed 5k on something like that doesn't mean they are making a bad decision if they go to Disney. If they can have their balance paid before the no interest deadline, then I don't see the problem.

Im still not seeing the difference in mortgage debt and cc debt. Its not like everyone buys air with credit cards. Many times items are purchased that can be sold in their own right - furniture, electronics, etc. In those cases there is an assumed "security" (to you) to pay off your cc balance just as there is security in your home with your mortgage company. You can tell me the line of "well furniture and electronics lose value once they are taken home", because while they do....I believe home values have dropped significantly over the past few years, leaving homeowners with lots of that purchased "air" I was referring to earlier.

Im glad others have skills that I don't. I'd be lost in an accountants office, a pharmacy, a law office, or a mechanic shop. I dont have those skills but I will need all of them at some point. But just because the lawyer may have no debt and can pay cash for a vacation doesn't mean I shouldn't be able to go because I do have debt.

People seem to forget that taking out a loan (cc, mortgage, whatever) is NOT a one sided deal. The banks or whoever making the loan has just as much responsibility (if not more) than those who are asking to take the loan. Banks make just as many bad decisions.

I have a family member who had a home that was paid for. She wanted to take out a mortgage. Wells Fargo did a "drive by" appraisal on a home built in 1936 and valued it at $110,000. She took out an $80,000 loan, within a year had to change jobs and couldn't afford the house payment. The house is being sold at public auction in less than 2 weeks and isn't worth $30,000. She owes over 100k right now. The electrical, plumbing, everything in that house is original from 1936 and its broken down beyond belief. Wells Fargo will lose their rear on this one. She didn't make a wise choice and took out a huge mortgage, however she would not have had that option if they would have done a proper appraisal. I'm glad Wells Fargo is eating this one. Maybe they will learn a lesson.

So high debt and bad choices are not always the sole decision of the person. Greedy banks cause more of this debt problem than you may think.

 

[ceecee]

We don't carry credit card debt. The card gets paid off every month--period. If taking a vacation meant we carried a credit card balance--we'd stay home.

Agreed!

 

[quentina]

OP, I have learned a few things during my tenure on the DIS....

The DIS population seems to have lots of rich folks with hundreds of thousands of dollars in various types of savings

The DIS population seems to have a lot of wealthy people who never make bad financial choices or splurge

The DIS population seems to be made up primarily of people who never take a vacation if they have any debt

The DIS population seems to be primarily made up of perfect people who never make mistakes, break a rule, or do any wrong

The DIS population seems to consist of many people who feel entitled to everything, including being entitled... to being entitled

Its like everyone who is wealthy, perfect and debt free flocked to the DIS and made their own little community. Therefore....

The DIS population does not represent me or my household.

If you can afford a vacation then YOU know it. Not someone on a message board who may or may not be from the advice giving background they claim. If people waited until they had no debt to take a vacation, travel services and tourist locations would be non-existent because there would be no one to bring in revenue.

Sharing your household finances here will only bring out the Desperate Housewife types who would scold you for going on vacation if you owed $10 on a bill that wasn't even due yet.

Take your vacation and enjoy it while others sit here and bicker back and forth about why you shouldn't.

You read my mind

 

[Disneyliscious]

Originally Posted by RabbitFood
We don't carry credit card debt. The card gets paid off every month--period. If taking a vacation meant we carried a credit card balance--we'd stay home.

For you folks who do this, Im just curious as to why you don't just save a "months worth of credit card debt" up and do away with your credit cards? If you can pay it off in one month, why do you even need them? If you can pay your balance every month then you can pay cash lol. Skip a month of purchases and viola! Now you have cash to pay for everything and no longer need that trusty old credit card......

...or do you?

 

[Lumiere Lover]

I think you should take the trip. As long as your debt is under control and going down, and you pay for the trip in cash, you could enjoy it.

You never know how long you get to make the memories, and you should enjoy yourself while you can. You're not ignoring your previous financial obligations, so go and have a great time!!!

 

[wisconsinmom]

Originally Posted by RabbitFood
We don't carry credit card debt. The card gets paid off every month--period. If taking a vacation meant we carried a credit card balance--we'd stay home.

For you folks who do this, Im just curious as to why you don't just save a "months worth of credit card debt" up and do away with your credit cards? If you can pay it off in one month, why do you even need them? If you can pay your balance every month then you can pay cash lol. Skip a month of purchases and viola! Now you have cash to pay for everything and no longer need that trusty old credit card......

...or do you?

Great question. I can answer for my own family We use a credit card that has no fees but earns rewards. I use a Disney Visa and my DH uses a Citibank card that he gets rewards with. So even though I have the cash to pay the bill I use a credit card for the rewards. There are also some bigger purchases like airplane tickets that I prefer to use a credit card for, no idea if it is true but I feel like I have more protection if I use a credit card.

I do use cash each week for groceries and for dining out. It really helps me stick to my budget!

I am fortunate to be in a situation where I can pay off my credit cards every month. Some of it is because I am careful with my purchases and some of it is because we have a bit of wiggle room in our budget.

 

[bellarella]

Originally Posted by RabbitFood
We don't carry credit card debt. The card gets paid off every month--period. If taking a vacation meant we carried a credit card balance--we'd stay home.

For you folks who do this, Im just curious as to why you don't just save a "months worth of credit card debt" up and do away with your credit cards? If you can pay it off in one month, why do you even need them? If you can pay your balance every month then you can pay cash lol. Skip a month of purchases and viola! Now you have cash to pay for everything and no longer need that trusty old credit card......

...or do you?

Because credit cards can be very useful tools.

People who pay their balances in full every month no more have "credit card debt" than people who pay their utilities in full every month have "utility debt." I never *need* to use my credit card. I have the money in the bank before I spend it. I don't need to skip a month of purchases to pay for everything in cash.

My number one reason is that it is much more convenient for me to pay one bill at the end of the month than watch money go out in drips and drabs all month. I have an easier time managing my money

My number two reason is that a credit card offers me security that a debit card cannot. If there is fraud, it is the credit card company's money that is gone, not mine. I do not have to wait even a second to have my money returned to me, because it never left my account.

Further nice perks:

My credit cards offer me rewards that outpace those that are attached to most debit cards.

I get an interest-free loan every month. Keeping my money in my bank earns me interest.

 

[TinkPirateMom]

Great question. I can answer for my own family We use a credit card that has no fees but earns rewards. I use a Disney Visa and my DH uses a Citibank card that he gets rewards with. So even though I have the cash to pay the bill I use a credit card for the rewards. There are also some bigger purchases like airplane tickets that I prefer to use a credit card for, no idea if it is true but I feel like I have more protection if I use a credit card.

I do use cash each week for groceries and for dining out. It really helps me stick to my budget!

I am fortunate to be in a situation where I can pay off my credit cards every month. Some of it is because I am careful with my purchases and some of it is because we have a bit of wiggle room in our budget.

Just wanted to say that you are right about the airline tickets. It is better to use a credit card for this purchase. If the airline goes under before your trip you can dispute the the charge with the credit card company and get the refund much quicker than other routes.

 

[Marionnette]

Originally Posted by RabbitFood
We don't carry credit card debt. The card gets paid off every month--period. If taking a vacation meant we carried a credit card balance--we'd stay home.

For you folks who do this, Im just curious as to why you don't just save a "months worth of credit card debt" up and do away with your credit cards? If you can pay it off in one month, why do you even need them? If you can pay your balance every month then you can pay cash lol. Skip a month of purchases and viola! Now you have cash to pay for everything and no longer need that trusty old credit card......

...or do you?

Convenience. Plain and simple.

We pay one bill instead of 10 or 15. All of our recurring bills that can go on a credit card get paid with a rewards credit card. We only need to keep track of one payment due date instead of many. We do the same with our business expenses. In some cases, we get a discount for signing up for the "easy pay" plan with automatic billing to our credit card. At the end of the year, we get a statement that breaks down our spending in various areas.

Of course, we could also set it up so that those automatic payments came directly from our bank account. But I have no desire to allow AT&T, Verizon, or any of the many other bills to have direct access to my checking account. Besides, I would never acrue all of those rewards points if I did.

 

[crashbb]

Originally Posted by RabbitFood
We don't carry credit card debt. The card gets paid off every month--period. If taking a vacation meant we carried a credit card balance--we'd stay home.

For you folks who do this, Im just curious as to why you don't just save a "months worth of credit card debt" up and do away with your credit cards? If you can pay it off in one month, why do you even need them? If you can pay your balance every month then you can pay cash lol. Skip a month of purchases and viola! Now you have cash to pay for everything and no longer need that trusty old credit card......

...or do you?

A few reasons:

1) My credit card gives me insurance - trip insurance, car rental insurance, and extra year on any warranty of anything I buy;

2) My credit card gives me cash back;

3) Having a credit card makes many purchases easier - online purchases, car rentals, hotels.

I put almost everything onto my credit card (and I do pay it off every month).

I'm in Canada, and our debit card system is not the same as in the US.

 

[nowellsl]

Back to the OP's question. I did go on vacation when I had debt. I had a debt repayment plan and emergency savings. I paid cash for the trips. I'm a FL resident and it was pretty cheap to go to Disney back in the day

Would I do it now, I don't think so.... I have developed a real aversion to paying interest I'm really glad it doesn't bother other people, that interest is helping pay for my rewards

 

[wisconsinmom]

OP- I think you should go on your trip! It sounds like you have a reasonable plan for getting your debt paid off.

 

[hsmamato2]

Credit card debt isn't necessarily just from tv's and such things. It can also be from emergency repairs or medical bills.

I agree and my point was this-it isn't our business if others choose to spend that way- but the basics are the point- having cc debt is having a loan you can't pay when it's due- extremely unwise.
planning an unnecessary trip when you have debt you can't pay is also unwise,it doesn't matter where it comes from.
Now,if I had some debt due to unexpected medical expenses(which I'd attempt to work thru my hospital and avoid the card for something like that) I MIGHT take a vacation before it got paid off...might.probably not though,as DH and I both hate debt and loans.
If I had a car payment (ACK!) I would likely plan a trip, but only if I could afford cash for my trip and to pay the car off double time.... I DO have a mortgage. And I go on trips. So that is debt.
but day to day cc bills that I can't pay? No. the principle is the same -I don't have the money to go on a trip. I would work HARD and pay it off first.
that,to me is budgeting well. I agree there are circumstances where people may spend from the heart, but again,not so wise.

 

[Disneyliscious]

I can totally see the rewards and perks as being a reason to use a CC. I don't have a cc so I wasn't familiar with the bonuses you can get.

I wonder how it will affect bank decisions as more and more folks become conscious of interest and pay off their balances every month. If a bank isn't making any money off of cc holders eventually something will change. I can't see them continuing to loan people money and provide incentives for free.

My parents had this happen with Bank of America. They paid their balance off each month without paying interest. The got a notice that they could either close their account or pay an annual fee each year. They closed the account.

I think its very wise to pay your balances off each month and am surprised at how many people here can do that. I don't see this as a trend that banks will allow to go on for much longer though. Let's all hope I'm wrong.

 

[gracie1]

As long as your able to make your payments and put food on the table and pay your bills, then go on vacation and enjoy your family. I have cc debt, $5500 and am paying on a cruise that I have booked for next year. And we will probably take a day trip at christmas. But you know what? My debt will get paid down. And this debt was not on something "fun" like a big screen tv (that was put on a cc with no interest for 3 years and paid off within that time frame!).
As long as you and your family are happy, then that is all that matters.

 

[nowellsl]

I wonder how it will affect bank decisions as more and more folks become conscious of interest and pay off their balances every month. If a bank isn't making any money off of cc holders eventually something will change. I can't see them continuing to loan people money and provide incentives for free.

Oh, they already have started making changes. They've already lowered the rewards for most of mine. My very best rewards card went from 5% to 3% a couple of years ago, then I got a notice the other day that they were changing the rewards from a set 3% on gas, grocery and drug stores to "revolving categories" kindof stinks, but I have a couple of back ups I just have to remember which card gives perks for which categories!! Any card that starts charging a yearly fee will lose my business in a heartbeat!

 

[mombrontrent]

Originally Posted by RabbitFood
We don't carry credit card debt. The card gets paid off every month--period. If taking a vacation meant we carried a credit card balance--we'd stay home.

For you folks who do this, Im just curious as to why you don't just save a "months worth of credit card debt" up and do away with your credit cards? If you can pay it off in one month, why do you even need them? If you can pay your balance every month then you can pay cash lol. Skip a month of purchases and viola! Now you have cash to pay for everything and no longer need that trusty old credit card......

...or do you?

The ONLY reason I use my credit card is for the rewards. I pay EVERYTHING possible on my card each month, from a coffee through the drive-through to bill payments. I then use the rerward points each month for free groceries. I get about $50 in free groceries every month just by using my credit card and then I pay off the complete balance every month.

 

[Marionnette]

I can totally see the rewards and perks as being a reason to use a CC. I don't have a cc so I wasn't familiar with the bonuses you can get.

I wonder how it will affect bank decisions as more and more folks become conscious of interest and pay off their balances every month. If a bank isn't making any money off of cc holders eventually something will change. I can't see them continuing to loan people money and provide incentives for free.

My parents had this happen with Bank of America. They paid their balance off each month without paying interest. The got a notice that they could either close their account or pay an annual fee each year. They closed the account.

I think its very wise to pay your balances off each month and am surprised at how many people here can do that. I don't see this as a trend that banks will allow to go on for much longer though. Let's all hope I'm wrong.

Credit cards charge the merchant a fee for processing the charge. Chase and Citibank are making money off of every purchase I make even if I don't pay a penny in interest or penalty fees.

 

[mombrontrent]

I can totally see the rewards and perks as being a reason to use a CC. I don't have a cc so I wasn't familiar with the bonuses you can get.

I wonder how it will affect bank decisions as more and more folks become conscious of interest and pay off their balances every month. If a bank isn't making any money off of cc holders eventually something will change. I can't see them continuing to loan people money and provide incentives for free.

My parents had this happen with Bank of America. They paid their balance off each month without paying interest. The got a notice that they could either close their account or pay an annual fee each year. They closed the account.

I think its very wise to pay your balances off each month and am surprised at how many people here can do that. I don't see this as a trend that banks will allow to go on for much longer though. Let's all hope I'm wrong.

Sure they will because they know most other people do carry a balance and they make money off of them. I've been getting my "free" groceries for 10 years now and they have never made a cent off me.

 

[mombrontrent]

Credit cards charge the merchant a fee for processing the charge. Chase and Citibank are making money off of every purchase I make even if I don't pay a penny in interest or penalty fees.

Yes exactly, if I use my card to buy a $1.50 cent coffee it doesn't cost me any extra but the coffee shop is paying the CC company a "fee" of say 25 cents for each transaction so the CC company is still making money from me using my card.