Real-life case – A week of vacation… 4 years to pay it off!

We all need vacations. Unfortunately, they often become a source of debt. Maryse and Stéphane know this all too well.

If you don’t plan your expenses and choose to pay for everything on credit, returning from a well-deserved break can become a financial nightmare. Maryse and Stéphane learned this the hard way when they decided to treat themselves to an all-inclusive week-long vacation with their children and another couple.

Plenty of good reasons to go

Although the 2 families went on the trip together, they didn’t have the same financial means. Stéphane had been unemployed for a long period, which put a strain on their budget. In fact, they had just started to get a handle on the debts they had accumulated during that period of unemployment.

But how could they resist the pressure from their children who were excited about the idea of having a dream vacation with their friends?

Maryse and Stéphane came up with all sorts of good reasons to justify their choice: Cuba is the cheapest destination; since it’s all-inclusive, there won’t be any additional expenses; the children deserve a reward after a good school year… In short, we only live once, and they would figure out a way to repay the debts quickly once they returned home.

20% interest rate

Initially, the trip cost $3,900, which was paid for using the couple’s credit card with a 20% interest rate. Once there, with activity fees, souvenir purchases, and other extras, an additional $1,200 was added to that amount.

«In the end, the couple found themselves with a debt of $5,100. They were not willing to only make the minimum payment suggested by the credit card, which is 3% of the balance. At that rate, it would take them 18 years to pay it off, and it would cost them $6,000 in interest», says Pierre Fortin, a licensed insolvency trustee and president of Jean Fortin et Associés.

Therefore, Maryse and Stéphane decided to tighten their belts a little and make fixed monthly payments of $150, extending the repayment period to 4 years and reducing the interest to $2,500.

A word of caution

Certainly, traveling creates beautiful memories, but if the only way to afford them is through credit cards, the pain outweighs the gain.

«People think they will repay the debt as quickly as possible because they are well aware of the interest costs. However, unforeseen expenses often disrupt their good intentions, and that’s when they lose control of their debt», warns Pierre Fortin.

Paying for a few days of pleasure over 4 years: is it really worth it?

  • Save money in advance for your trip. Plan well in advance, and all it will take is saving a few dollars from each paycheck to achieve your goal.

  • Even with an all-inclusive package, there are usually additional expenses to consider. Include them in your vacation budget.

  • To reduce costs, take advantage of a family cabin if possible or opt for camping. Kids love it!

  • Can’t resist the allure of this trip? In that case, consider using a credit instrument that is less expensive than a credit card, such as a line of credit. At an 8% interest rate, the adventure would have cost $700 in interest instead of $2,500 at 20%.