Vacations with Debt

[mumom95]

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?

For the perks.

We leave for Hawaii in 13 days. Our first stop is for 3 days on Oahu. We are staying at the Hilton Hawaii Village for those 3 nights for free, thanks to our credit card (and other stays at Hilton Hotels). Plus, our two kids are flying for free from Ohio to Hawaii thanks again to our credit card (and other flights on Delta). It's a total savings of about $3000.00 just from using our credit cards and the hotel and airlines reward cards. Plus, just putting the vacation on our credit card and paying it off that month, we will earn enough hotel points for another night free at a Hilton hotel.

We don't pay a cent in interest, no yearly fees and I have a record of everything I spent if I need to look back over it for the budget.

 

[LovableGluttons]

Hi!

I would not go on vacation if I carried debt.

I don't have credit cards or loans.

While I understand why people use credit cards for rewards, I don't have any big expenses every month that would likely ever amount to enough in rewards to make it worth it.

DH and I have very few monthly bills, just utilities, groceries, gas for our vehicles, things like that. I'm used to the simplicity and honestly don't want to have to keep track of more than that.

If you feel comfortable going on vacation and the state of your finances, then you should do it.

I've never vacationed with debt, I've never had debt. When I was a young adult and in college, I was extremely poor. I think that negative experience rule the financial decisions I make.

Because DH and I have lived this way for many years, we've been at the point that we can afford to pay cash for our vacations now.

My favorite book is "The Millionaire Next Door". It describes the lifestyle DH and I live. I don't feel we're better in any way, we're just different because of exposure to such a negative financial experience early in our lives. That experience made us determined never to put ourselves at risk again.

That is what works for us, but may not work for you.

I've wanted a house with a pool since I was a small child. Our house was framed when we bought it, so the permits were already obtained. I didn't want to stop the building long enough for the new permit to install the pool back then. Then again, the added cost to the amount of the house probably would have made me chicken out then as well. I actually met with a pool builder this afternoon and chickened out again. When I think about how many hours I have to work to have the money to pay for the pool, I get nauseous. I've been trying to build a pool for three years. The idea of losing the interest from our savings account that the $52,000 for the pool costs just freaks me out.

OP, if you feel comfortable doing it, do it. If I felt comfortable doing it, I would. I think it is actually a personal decision.

 

[Colleen27]

I might, depending on the rest of the picture. Kids are only small for so long and the "great recession" travel bargains won't be around forever; I can totally understand wanting to take that trip now while paying off the debt slowly rather than paying the debt down faster and then spending hundreds of dollars more for the same experience next year ("hundreds of dollars" not being pulled out of mid-air; there is a $600 difference between rack rate for this year's WDW trip and what the same trip will cost in 2012).

I'm not a DR follower. I'm extremely debt adverse for myself but I also believe in balance and that is a very personal thing. Our circumstances and priorities allowed us to be debt free at a young age, but had we been faced with a different set of facts I don't believe I'd have always put debt reduction above vacationing with my family. Time is more precious than money to me; you can earn more money but you can never buy more time.

 

[*Seanaci*]

I have credit card debt and I go on vacations. It would be one thing if I couldn't pay my credit card bills, but I can, and I do. No biggie.

Ditto this. We really shouldn't have gone...but hindsight is 20/20 and the trip now can't be taken back. So, we move along and await our next opportunity to go (with very little debt and a fair amount in savings).

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.

This seems to come up a lot. And I see all ends of the spectrums from the Dave Ramsey NO DEBT folks to the Disney even if they do not have a job

So my question is do you think it is ok or would you to Disney or any other vacation if you had any credit card debt.

Assuming:

Great retirement plans for both spouses
Some savings
Debt less then $5000 managable payments
Good rates on all debt and well within families means in secure positions with marketable skills and education.

Vacation would be paid in full from cash and would be less then amount to be fully debt free. Vacation is discounted and while it has lots of perks bugeting will limit finaicial impact.

So would you see this as okay or do you think it is foolish?

Given the bolded...I say go. You know where your family is at financially...regardless of how you pay for the trip...if you can afford it...and still pay your bills/debt...then just go and have a good time.

Not being certain when our debt would be paid off/down considerably, we opted to push our 2011 trip to 2012. Doing so, we will be gaining $600 a month starting in April of 2012 (building up savings, and paying off, or darn near off, the 1 credit card we still have). So, going in Dec of 2012 we'll be comfortable and confident to make the trip and know we'll be able to pay for the trip AND have enough spending/eating money.

 

[indimom]

I'm just answering for myself, no judgement or opinion whatsoever in regard to other posters' financial plans/methods.

I could not take that trip right now. We are not taking any vacation this year (not even a staycation) for that very reason. We have debt. It's not even high-interest credit card debt, but we still are not going anywhere.

Up until the beginning of this year, we had only our mortgage (11 years left at 4.25%.) Since the winter, we have added a $6,000 car loan (we only managed to save 2/3 of the car price) at 2% interest. We also have been accumulating medical debt. It's an interest-free payment plan, but we haven't seen the end of the bill yet and there is no way of knowing when or if the treatments might come to an end.

Under those circumstances, I'm not comfortable spending on a vacation. We've been enjoying some of the low cost entertainment we can get at home and that is enough for now.

I will admit, if the medical situation continues for a long time (beyond another year or two) with no resolution, I could see us breaking the no-debt before vacation vow and taking a very low-budget trip. It would probably involve driving to my sister's house in Florida, buying groceries and enjoying the beach. About the lowest budget trip we could take and still feel like a "real" vacation. But, my plan at this point is to clear ALL of the debt first. We'll see.

ETA: On the subject of using credit cards and paying off monthly. We've been doing that for a few years. The Disney Rewards went a long way on our last trip. I put absolutely every bill I can on the card and pay off at the end of the month. I even had our monthly medical payment billed directly to the card. By the time we can get back there, we may have the tickets or hotel paid for. So, it's worth it in my opinion, as long as we watch the budget and make sure we don't 'charge' more than we can pay off each month.

OP, whatever you decide, just make sure YOU are comfortable with it. Only you really know your financial situation. If you are uncomfortable in any way, maybe you should think again.

 

[GinnyEmma]

Indimom, I hope your medical stuff settles in a positive manner. Lol, I must admit I hate paying hospitals and doctors when I still feel like crap.

 

[mombrontrent]

I might, depending on the rest of the picture. Kids are only small for so long and the "great recession" travel bargains won't be around forever; I can totally understand wanting to take that trip now while paying off the debt slowly rather than paying the debt down faster and then spending hundreds of dollars more for the same experience next year ("hundreds of dollars" not being pulled out of mid-air; there is a $600 difference between rack rate for this year's WDW trip and what the same trip will cost in 2012).
I'm not a DR follower. I'm extremely debt adverse for myself but I also believe in balance and that is a very personal thing. Our circumstances and priorities allowed us to be debt free at a young age, but had we been faced with a different set of facts I don't believe I'd have always put debt reduction above vacationing with my family. Time is more precious than money to me; you can earn more money but you can never buy more time.

Not necessarily, haven't you heard that America is just turning the corner into another recession that is supposed to be even worse this time
That is what makes savings and debt repayment even more important right now.

 

[nunzia]

Actually, the OP did specific CC debt, but she never specified this was a real situation, just a scenario that we were supposed to answer with what WE would do.

But yeah, balance is important. So is knowing your own tolerance.

sorry..missed that one... I just thought she said "$5,000 in other debt"

 

[marie1203]

I am just going to answer OP question. I think it really depends in other factors. Like how reliable and old are your cars? Any major repairs that might be coming, etc. The way I see it is if there is something that might be coming soon (like changing brakes, tires, etc) that will take the money available for that and put into the vacation fund then eventually you end up creating more debt. If this is the case then no, I wouldn't vacation. The other thing I would add up is interest and how much you are paying monthly in your cc? We do not have cc debt, but we do have a car payment and mortgage and we still vacation. We got a great deal on our car and we could trade it in now for the price we pay for it 3 years ago and is more than half way paid for. I see credit card debt a little different, because it is an unsecure debt. The other think I would not vacation without at least a six months emergency savings.

To be honest it always worries me when people ask if they should vacation with debt, because if you are really comfortable with you financial situation then there is not need to ask. Only you know you financial situation and only you know if this vacation is right for you.

 

[manhattan]

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.

Exactly!!

 

[bpesch]

My policy has always been no vacation unless I can afford to pay for it before I go. I just don't understand going into debt to take a vacation. A vacation is a luxury and should be treated as such. Don't take it unless you can pay for it!

That being said, if I had a lot of credit card debt, no, no vacation.

 

[janey99]

Given the OP's scenario, I would not go on the vacation. I would take the money earmarked for the vacation and pay the 5k debt.

Given the OP's description of the rest of her situation, I wonder why the debt is there at all - it is a pretty nominal amount in light of the fairly good personal/economic situation she describes, and I can't imagine that whatever interest is being gained on savings outweighs the likely interest rate on the debt, given the current investment environment. I would just pay it and be done with it.

To the poster who asks why people use credit cards - the convenience of not having to carry cash, ability to make long distance/internet purchases with buyer protection, and the rewards. We pay ours each month. In August, we are doing Disney with 1500$ worth of the vacation paid for by redeeming Disney dream dollars - YAY!

Jane

 

[crisi]

sorry..missed that one... I just thought she said "$5,000 in other debt"

no problem - it can be hard to get everything, particularly as a thread moves into a lot of pages (I know I don't always manage). As we can see from all the posts jumping to the conclusion that this is a real scenario for the OP. It might be, I don't think it is. I think she is trying to get a feel for posters around here and their debt tolerance and why. I don't really think this is a "what should I do" question as much as it is a "what would you do" question.

There ARE a lot of people here who are managing "luxuries" like vacations and claiming to live debt free. And for someone who has never imagined that to be possible because "Americans carry debt" and everyone you know carries debt, showing up here (or, even more culture shock - a Dave Ramsey board) can be almost confusing.

 

[ccgirl]

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

Bottom line, a credit card is the same thing as a mortgage. They are both debts. You are paying interest on both. I think, maybe, people are more comfortable with mortgage debt because they feel they never would have purchased a house if they had to pay cash for it.

My policy has always been no vacation unless I can afford to pay for it before I go. I just don't understand going into debt to take a vacation. A vacation is a luxury and should be treated as such. Don't take it unless you can pay for it!

That being said, if I had a lot of credit card debt, no, no vacation.

OP is not using credit to pay her vacation. She is paying cash for the vacation which may delay her paying off her cc debt. Same as all of those that vacation and do not put extra into their mortgage. Technically, they are prolonging the time it would take to pay off their mortgage.

 

[hsmamato2]

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.

No, my simplistic explanation is actually a far better situation than most people with cc debt are creating....like you say,most people WOULDN'T pay that 600.00 per month toward the debt,they'd pay the 60.00 minimum,etc. which makes the debt grow even worse on a weekly basis.
Now, plenty of people get in upside down on a home,that's foolish too! But it doesn't change the fact that cc debt is an unsecured loan,and people usually add to the rolling balance monthly,rather than a one time purchase,etc.
Now,I heartily agree in balance,and I try to love the life I have,with what I have. Treasure the days,b/c they go so fast,etc. But High priced vacation with out of control debt that grows monthly? My answer hasn't changed.
But I don't think my quality of life would be enhanced by creating extra stress and debt I don't need......

 

[crisi]

Bottom line, a credit card is the same thing as a mortgage. They are both debts. You are paying interest on both. I think, maybe, people are more comfortable with mortgage debt because they feel they never would have purchased a house if they had to pay cash for it.

I have to disagree with you there (accounting and finance degree). The difference between secured debt and unsecured debt is fairly significant. Also, the difference between a fixed debt and a revolving debt is significant. Both from a finance standpoint and from a legal standpoint. Mortgage terms are - even if you have a late 90s "anything goes" mortgage - are much more controlled than credit card terms - which are NEVER written to your advantage.

Moreover, there is the impact of net worth. First as related to secure debt (I owe $100,000 on a house worth $250,000 - that means my house adds to my net worth by $150,000 - on the other hand I have a credit card bill on my desk for $2000, that simply subtracts $2000 from my net worth). But in terms of overall impact of liabilities on net worth. Few people have no mortgage (and own a home) and credit card debt. If you have a significant positive net worth and choose to carry credit card debt, that's a different story - but my guess is that most people who have a significant net worth don't want to pay interest, or if they do, they want it tax deductible - and that is usually an option at that point.

 

[sk!mom]

Hi!

When I was a young adult and in college, I was extremely poor. I think that negative experience rule the financial decisions I make.

My favorite book is "The Millionaire Next Door". It describes the lifestyle DH and I live. I don't feel we're better in any way, we're just different because of exposure to such a negative financial experience early in our lives. That experience made us determined never to put ourselves at risk again.

That is what works for us, but may not work for you.

I've wanted a house with a pool since I was a small child. Our house was framed when we bought it, so the permits were already obtained. I didn't want to stop the building long enough for the new permit to install the pool back then. Then again, the added cost to the amount of the house probably would have made me chicken out then as well. I actually met with a pool builder this afternoon and chickened out again. When I think about how many hours I have to work to have the money to pay for the pool, I get nauseous. I've been trying to build a pool for three years. The idea of losing the interest from our savings account that the $52,000 for the pool costs just freaks me out.

OP, if you feel comfortable doing it, do it. If I felt comfortable doing it, I would. I think it is actually a personal decision.

I could have written this. DH and I grew up without any financial stability and then were very poor as we put our selves through college. It took years for us to gain the financial stabilty that we have now enjoyed for years and we cherish it. We have seen first hand how stressful debt is to us (not everyone- us).

Now we're dealing with retired parents who never planned to stop working and we don't want to be in that position in our own retirement.

No doubt our individual experiences color how we feel about and manage debt.

 

[ccgirl]

I have to disagree with you there (accounting and finance degree). The difference between secured debt and unsecured debt is fairly significant. Also, the difference between a fixed debt and a revolving debt is significant. Both from a finance standpoint and from a legal standpoint. Mortgage terms are - even if you have a late 90s "anything goes" mortgage - are much more controlled than credit card terms - which are NEVER written to your advantage.

Moreover, there is the impact of net worth. First as related to secure debt (I owe $100,000 on a house worth $250,000 - that means my house adds to my net worth by $150,000 - on the other hand I have a credit card bill on my desk for $2000, that simply subtracts $2000 from my net worth). But in terms of overall impact of liabilities on net worth. Few people have no mortgage (and own a home) and credit card debt. If you have a significant positive net worth and choose to carry credit card debt, that's a different story - but my guess is that most people who have a significant net worth don't want to pay interest, or if they do, they want it tax deductible - and that is usually an option at that point.

Okay, I admit finance is not my strong point. Biology degree here. So, perhaps that is why I just don't understand why those with a mortgage would tell someone with a 5K credit card balance that they could never go on a vacation with debt when they have debt themselves. I understand equity in a house can add to your net worth but it's still a debt; right? You are still paying interest and the longer you take to pay the loan the more interest you will pay; right? i wonder how many of those people that are saying they could never go on a vacation with cc debt are actually in a favorable position with their mortgage as you and I. By favorable, I mean have a good deal of equity in their house. I get the difference between secured and unsecured but, in simplistic terms, it's still a debt your are paying back with interest to someone; right?

 

[GinnyEmma]

I was wondering the same. Equity is equity. If someone has a lot of equity what would it matter if the debt was in mortgage vs. Cc. As long as the interest was similar. Psychologist here.

My one concern about that would be that if by some craziness you are late with a payment the interest goes crazy.

 

[mombrontrent]

i would never take a vacation with CC debt but I have a mortgage. However my house is worth about $350,000. I still owe $200,000 but if i sold the house tomarrow I could pay off that $200,000 and have appromimaety $150,000 in my pocket. Plus mu intrest rate on my mortgage rate is 3.8% . Most credit cards have a much higher intrest rate.