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Old 04-12-2014, 12:59 PM
 
Location: So Cal
40,437 posts, read 39,959,328 times
Reputation: 41907

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We've been wanting to do a vacation to Europe for a long time now. The question that I have is does it make sense to pay for the trip out of our savings or charge it.

We're debt free except for our mortgage. We are financially responsible. Just recently our family has been coaxing us to just do it, life is short and while we're still young enough yadda yadda yadda.

These are older family members. One of them is Mr.Tightwad himself and he's even saying just do it and put it on credit, don't worry about taking it out our saving cause we're never gonna pay it back to ourselves.

These are the points they're making:

Do it while we're still young enough.
Use credit card and then pay it off for a year, then go on your next vacation the next year, etc.
If you pay for it with savings, you won't put all that money back into savings.
If you pay with savings, you're more likely to keep putting if off until you've saved "enough". (We've been wanting to go there for yrs and have been putting it off so maybe they are right in nagging us to go.)


These are the basic points, we do have enough money in savings to be able to pay for something outright...

Not sure which way to go here???
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Old 04-12-2014, 01:27 PM
 
12,705 posts, read 9,964,692 times
Reputation: 9515
Quote:
Originally Posted by Chowhound View Post
We've been wanting to do a vacation to Europe for a long time now. The question that I have is does it make sense to pay for the trip out of our savings or charge it.

We're debt free except for our mortgage. We are financially responsible. Just recently our family has been coaxing us to just do it, life is short and while we're still young enough yadda yadda yadda.

These are older family members. One of them is Mr.Tightwad himself and he's even saying just do it and put it on credit, don't worry about taking it out our saving cause we're never gonna pay it back to ourselves.

These are the points they're making:

Do it while we're still young enough.
Use credit card and then pay it off for a year, then go on your next vacation the next year, etc.
If you pay for it with savings, you won't put all that money back into savings.
If you pay with savings, you're more likely to keep putting if off until you've saved "enough". (We've been wanting to go there for yrs and have been putting it off so maybe they are right in nagging us to go.)


These are the basic points, we do have enough money in savings to be able to pay for something outright...

Not sure which way to go here???
Unless you can borrow at a rate below your mortgage or you would have no emergency fund left, pay cash.

If you can borrow at 0%, you might want to do it, and throw an equal amount at your mortgage. In that case, you would be effectively 'refinancing' a portion of the mortgage at 0%. But make sure you can pay it off before the deal expires, of course.
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Old 04-12-2014, 01:41 PM
 
635 posts, read 692,233 times
Reputation: 818
It all depends on how much you have in savings. Do you have enough to live on for 6 months or more if needed? Will the Europe trip put an obvious dent in your savings portfolio?
Traveling is my LIFE so I want you to go, go , GO, but I wouldn't charge it at all. This is one of the reasons why I accumulated so much debt.

If you plan on traveling more after this, I would suggest opening a savings account specifically for traveling. This is what I did.
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Old 04-12-2014, 01:46 PM
 
Location: NJ
24,115 posts, read 30,231,951 times
Reputation: 16002
Quote:
Originally Posted by Chowhound View Post
We've been wanting to do a vacation to Europe for a long time now. The question that I have is does it make sense to pay for the trip out of our savings or charge it.

We're debt free except for our mortgage. We are financially responsible. Just recently our family has been coaxing us to just do it, life is short and while we're still young enough yadda yadda yadda.

These are older family members. One of them is Mr.Tightwad himself and he's even saying just do it and put it on credit, don't worry about taking it out our saving cause we're never gonna pay it back to ourselves.

These are the points they're making:

Do it while we're still young enough.
Use credit card and then pay it off for a year, then go on your next vacation the next year, etc.
If you pay for it with savings, you won't put all that money back into savings.
If you pay with savings, you're more likely to keep putting if off until you've saved "enough". (We've been wanting to go there for yrs and have been putting it off so maybe they are right in nagging us to go.)


These are the basic points, we do have enough money in savings to be able to pay for something outright...

Not sure which way to go here???
what does "savings" mean? is that money saved specifically for random expenses or is that what you are going to use to retire with? first of all, you cant pay credit card interest. so if you are doing this, then get a 0% introductory rate credit card and pay it off before the intro 0% expires.

whether or not depends on what you can afford to do based on income and financial goals. if you plan on retiring on nothing but social security, that opens up money for you to spend. the whole "do it while you are young" thing sounds wonderful but what does that mean? are you going to be having orgies and doing drugs? you can probably enjoy it when you are a little older. but if its such a huge priority for you, then you could make spending cuts elsewhere to afford it.

some of those points "they" make seem really silly. if you were to spend it from "savings" and then the concept is that you will never be able to put that money back; then you probably cant afford to do it at all.
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Old 04-12-2014, 02:43 PM
 
Location: DFW
6,795 posts, read 11,765,661 times
Reputation: 5149
Try paying with credit card rewards if you're planning for a vacation at least a year in advance. This should be enough time to sign up with a few credit cards with large sign-in bonuses which can be redeemed for airfare and hotels. Use savings for the remaining smaller expenses like food and admissions passes.
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Old 04-13-2014, 03:01 PM
 
Location: North Idaho
22,669 posts, read 28,685,250 times
Reputation: 43679
You pretty much have to pay for it all with credit cards. If you are going to Europe, I suggest that you call around and find the card that offers the best exchange rate and lowest fees for foreign exchange.

Then when you get home, you decide whether to pay the credit card off immediately or over the next year. For me, that would depend upon what the interest rate was and how much my savings were earning for me.
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Old 04-13-2014, 03:42 PM
 
2,593 posts, read 5,286,635 times
Reputation: 5188
Credit cards are a high-interest way to borrow money. (If you use them to borrow money, that is). A home equity loan would be more economical.

Seems to me that the main problem with financing luxuries is that it leads to thinking that there is no problem with borrowing for other luxuries. And that way lies ruin.

Personally I only buy things (and experiences) that I can afford.
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Old 04-13-2014, 05:35 PM
 
Location: Gatineau, QC, Canada
3,402 posts, read 4,444,578 times
Reputation: 4409
What I do is extract money through CC, which charges me the exact exchange rate (or at least at a negligible loss) and then transfer my money to my CC balance online as I go. It appears that I am not charged for using it abroad at the end of the month.

If you have the money, you mine aswell pay for it so you don't pay more for it in the long run. Or if you're good about keeping up with payments, pay it off in segments before you reach the monthly interest threshold.
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Old 04-13-2014, 09:34 PM
 
9,778 posts, read 16,971,140 times
Reputation: 18394
I would be inclined to pay for it in cash. You can then take whatever credit card payment you were planning to make and deposit that money back into your savings.
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Old 04-14-2014, 12:54 PM
 
Location: North Idaho
22,669 posts, read 28,685,250 times
Reputation: 43679
Quote:
Originally Posted by rational1 View Post
Credit cards are a high-interest way to borrow money........
It depends. I keep receiving offers to loan me money for 0% interest for 6 months. Or, a better one, 1.99% interest for 2 years. I wouldn't mind taking a European vacation for 0% interest and just making payments on it for six months, to have it all paid off by the time the interest started. (provided I intended to go to Europe anyway)

You have to look at the card and what the rates are.

Yes, I know that they are trying to coax me into running up a big balance that I will leave running and can't pay off in a chunk. These particular cards are 9% regular rate and they both offer really good foreign exchange rates and fees. If I had cash earning interest somewhere else, some folks would leave the money earning interest and not pay off the 0% card until the 6 months were ended.

This is not a yes/no question. The answer depends upon how the figures look when they are run.
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