Share

Three tips on how not to spend over a year paying off your vacation


Three tips on how not to spend over a year paying off your vacation graphic

If you're one of the millions of Americans planning on taking a vacation or if you've just come back, don't let the excitement of getting away cloud your better judgment. It's not much fun or very relaxing to come home to face your vacation debt and realize it could take more than a year to pay it off.

In a recent CIT Bank Harris Poll Summer Savings Survey, 62% of vacationers spent up to $5,000. However, despite the significant expense, 44% of respondents say vacation savings is a low priority, and 29% took extreme measures to pay for their vacation including:1

  • Taking out a bank loan and going into debt
  • Maximizing or exceeding the limit on a credit card
  • Clearing out savings accounts

And, according to a LearnVest Money Habits and Confessions Survey, 74% of vacationers went into debt to pay for a vacation. This debt is significant given that on average, Americans spend 10% of their annual income on vacations with some spending as much as 15%.2

Using your credit cards to pay for vacation can certainly be convenient. But it can also be a trap, causing you to spend the next six months to more than a year paying off that two-week trip.

Here's the smart way to plan for your vacation.

  • Make a vacation fund part of your budget. Decide on a destination and estimate your costs, such as transportation, lodging, food, entertainment, etc. Start putting aside money each month toward your vacation fund. Even if you use your credit cards to pay for things on your vacation, you'll be able to pay off the balance when you get home and avoid paying interest on your debt.
  • Open a dedicated savings account. To prevent tapping your vacation fund for other expenses, set up a separate account. Look for an account with a higher-than-average interest rate such as our Money Market Account.
  • Automate your savings deposits. Once you've decided how much you want to spend on your vacation, calculate the monthly amount. Then set up an automatic deposit to your vacation savings account. You'll be less likely to spend money you don't touch.

Here's a breakdown of the benefits of saving for your vacation.

Savings for $5,000 Vacation3
Using Credit Card for $5,000 Vacation4
Monthly Savings Deposit
$400
Monthly Payment
$400
Annual Percentage Yield
1.85% in a CIT Bank Money Market Account
Annual Percentage Interest Rate
17%
Compounding
Daily
Minimum Payment Percent
3% (Check your statement – usually 2%-3%)
Months to Save
12
Months to Save
14
Total Interest Earned
$55.87
Total Interest Charges
$542.31
Estimated Total
$5,256.00
Estimated Total
$5,542.31

Once you have your vacation spot chosen and are putting aside money to pay for your trip, it's time to also think about how you can maximize your vacation dollars. Here are a few simple travel tips to help you save on big-ticket items:

  • Be flexible when traveling. If you're flying somewhere, you might find lower airfares if you are willing to fly on weekdays or by choosing an indirect flight. There are a number of online services and apps to help you shop for the best fares.
  • Think about group excursions. Very often group travel packages will offer excellent discounts on airfares, lodging, food and excursions. Plus, all the arrangements are made for you and the trip organizer handles the details.
  • Sign up for a rewards card. Take advantage of hotel and airline rewards programs. Once you are a member, you will receive advance notice of any special offers or discounts that can make your travel or stay that much more enjoyable.

Vacation is for relaxing and having fun, not worrying how—and for how long—you'll pay for it. Start your vacation fund now.

For more information on savings and Money Market accounts and current rates, visit us at CIT Bank.

Open an account


Selected products ()
Product
APY**
Minimum balances
Available as IRA
Available as Custodial
APY**
Minimum balances
Available as IRA
Available as Custodial