How to Pay for a Vacation

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Wondering ​​how to pay for a ​​vacation on a budget? Whether you’re dreaming of an exotic beach getaway or a weekend trip to the mountains, travel expenses can add up fast. In a 2023 survey, 39% of Americans said they couldn’t travel because prices were too high.

Fortunately, there are ways to financially prepare for future vacations and cut the cost of travel by strategically choosing your ​​payment methods, travel dates and more.

5 ways to pay for your dream vacation 

Before booking your next trip, try these budget-friendly tips for reducing your travel costs and avoiding costly debt to ​​pay for vacation: 

Credit card rewards 

Credit cards can help pay for a vacation. The right rewards credit card could cover some of your biggest vacation expenses. Consider these options for making your trip more affordable: 

  • Travel rewards credit cards: Earn travel points or miles that can be redeemed for flights, hotels, rideshare or experiences.  
  • Cash-back rewards credit cards: Get a set percentage of cash back for every dollar you spend, with higher percentages for certain categories like airfare. 
  • Welcome-bonus cards: Some cards offer a large, one-time bonus of rewards points, miles or cash-back, when you hit a spending target within a set timeframe. 
  • Introductory 0% APR cards: Avoid interest charges on your vacation purchases by putting them on a 0% introductory APR card, and then paying them off before the introductory period ends. 

Book early 

You can avoid paying high prices by booking travel at the right time. If you wait until the last minute, your only options might be ultra-pricey flights with excessive layovers and costly hotels in undesirable locations.  

Instead, book your stays during the ideal times for price savings: about ​​one to four months before domestic flights and 10 to 11 months before international flights. 

Book during off-season 

Sure, everyone wants to head south for the winter, but traveling with the pack comes at a premium. For cheaper flights and lodging, ​​​avoid traveling to your destination during the following popular days and seasons: 

  • Major holidays and long weekends 
  • Peak season for local weather 
  • Fridays and Mondays (for departing flights) 
  • Popular local events like festivals, parades or sporting events 

You can also use a booking tool like ​​Google Flights to view a forecast of fare prices on specific dates. 

Sinking fund 

A sinking fund is a savings fund you create to cover a specific, future cost. If you’re planning a vacation in advance, you can start building a sinking fund to help you ​​pay for vacation with cash. Here are a few ways to make it happen: 

  • Set a savings target for your trip, including the full cost of flights, ground transportation, lodging, food and activities.  
  • Divide your savings goal by the number of paychecks you’ll receive before your trip. 
  • Set up an automatic, recurring deposit to your sinking fund from each paycheck, even if it’s only a portion of the total amount you need to hit your savings target. 
  • Keep the funds in a high-yield savings account (HYSA) or another account that earns interest, with no fees. 
  • Review your credit card and bank statements to find costs you can cut between now and your vacation, then divert the extra money to your sinking fund.  
  • For family vacations, ask the kids to make small contributions from their allowances or from money earned for odd jobs. 

Vacation loan 

A vacation loan is a personal loan that’s used for the purpose of travel. While taking on debt isn’t ideal, using a loan instead of a credit card could save you money since the interest rates are often much lower on loans. 

By comparison, the ​​average APR on credit cards is nearly 20%, but the average APR on a 24-month personal loan is around 11%.  

Start saving now 

A big vacation is rarely a last-minute idea. You’ve probably been daydreaming about burying your toes in the sand or taking the kids to EPCOT for months, if not several years.  

If you’re someone who daydreams about big vacations, consider making them a reality by working ​​vacation payment plans into your monthly budget. Even if you just save $50 a month, setting cash aside for vacation savings will help you realize the fantasy of getting away. 

Written by Sarah Brady | Edited by Rose Wheeler

Sarah Brady is a financial writer and speaker who’s written for Forbes Advisor, Investopedia, Experian and more. She is also a former Housing Counselor (HUD) and Certified Credit Counselor (NFCC).

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