How (and Why) to Avoid Vacation Debt

Are you taking a vacation this year, or borrowing one?

A 2017 study from financial planning company LearnVest shows that 74% of Americans have gone into debt to pay for their vacations, whether they put a whole trip on a credit card or end up spending beyond their budget while they travel. How much debt? Survey respondents reported an average of $1,108 per trip. And it’s easy to see why: budgets are tight for many families, and many people see vacation as a chance to live in the moment and treat themselves.

Whether you pay vacation expenses up-front, or leverage credit to supplement your travel fund, it’s always a good idea to plan your budget ahead of time. Your holiday from work should be a time to relax and recharge, and that extra preparation can help you enjoy your trip, without letting financial worries get in the way. With some strategies and a budget, you can avoid surprise bills that kill a post-vacation high or even worse­­, fees and interest that add up long after the fun is over.

So how do you plan a great vacation—without paying for it later? Here are four tips to minimize vacation debt and make the most of your time off.

Start a vacation fund.

The best way to avoid debt is to save up ahead of time. While it may seem daunting to carve a space in your budget for future vacations, every dollar you save now is a dollar you won’t have to scrounge for later.

To figure out how much to save, start by looking at how much you spent on past trips. This helps you get a clear picture of how much you actually pay for a trip, not just what you budget. Consider starting a savings account just for your vacation (if your checking account doesn’t come with multiple complimentary savings accounts, look into an account that does). Name your new savings something specific, like “Cabo vacation” or “annual family trip,” to keep you focused on your goal. You could also schedule a recurring automatic transfer from your checking straight into your vacation savings.

The good news? It’s pretty much impossible to save too much for a vacation. The more you put away now, the more stress-free fun you can look forward to.

Pay big expenses in advance.

Once you find a good deal on flights, don’t wait too long–buying before prices creep up could save you big. And don’t stop there. As you plan your trip, see what other big expenses you can pay up-front. It’s often easier to make bigger purchases ahead of time one-by-one, instead of all at once.

Many hotels will accept payment ahead of time, either over the phone or by reserving online. That way, your lodging is paid for long before you go on your trip. You may be able to pay in advance for rental cars, campsites, and excursions. If you do pay ahead of time, be sure to check their cancellation policy and look into travel insurance in case you need to change your plans at the last minute.

Use credit—wisely.

Even if you’ve budgeted plenty of money for a trip, you might want to bring a credit card along in case of an unforeseen expense, like an emergency. And if you do use credit for some vacation expenses, have some strategies in place ahead of time.

Go over the terms of your credit card before you travel. Aside from interest rates, some cards charge fees for cash advances or international purchases. If you’re headed to a foreign country for your vacation, check with your bank to make sure you can access your money and use your card while traveling.

If you’re thinking about getting a new credit card, before a vacation could be a good time to shop around. Many credit cards offer rewards, such as cash back or airline miles, and some offer introductory perks for new cardholders, like lower interest rates. That way, you can earn credit towards your next vacation when you use your card to pay.

Of course, interest payments should be a concern if you take on debt during a trip. Think about how long you can comfortably take to pay off your credit card and how much you’ll be able to pay in the months after your vacation. Allocating an extra two or three months to pay off your vacation might be worth the added interest payments. Too much, though, and you could end up regretting your dream trip.

Are you already in debt? You still need a break!

So, money’s tight this year and you don’t want to rack up credit card bills. Or maybe you’re still paying off last year’s vacation. Should you skip this year’s trip?

While it might be tempting from a budget perspective, skipping vacation can have negative consequences for your family, your health and even your productivity. Time off is important for reconnecting with your loved ones and relieving the day-to-day stress that can lead to health problems. There’s even evidence that taking a vacation could help you land a promotion at work. So go ahead, file that request for time off!

If traveling isn’t in the budget this year, you can (and should!) still take a break. Save money by planning local road trips instead of flying. Check out books from the library, plan a local hike or dig into your favorite hobby. You can still have a relaxing vacation without running up your credit card bills—which means you can start saving for next year.

If you need a quick getaway (like, right now!), check out these tips to save on last-minute travel.