Wendy Bennett

As summer approaches, the lure of sandy beaches, scenic road trips, and spur-of-the-moment getaways is hard to resist. And with social media feeds overflowing with dreamy destinations, you may feel the pressure to join in no matter the cost.

But before you swipe your credit card to book that last-minute escape, understand the difference between good debt and bad debt, and how a “quick” vacation charged to your card can turn into a long-term financial drain.

Not all debt is created equal. In fact, some debt can be a smart investment in your future. Good debt is borrowing that helps you build wealth or increase your income over time (think student loans, mortgages, or a small business loan). These typically come with lower interest rates and have long-term benefits.

Bad debt, on the other hand, is money borrowed to buy things that don’t increase in value and often lose value quickly (think high-interest credit card debt used for nonessential expenses — like a summer vacation).

Before you swipe your credit card for that vacation, let’s discuss what that credit really costs. Assuming you charge a $3,000 vacation to your credit card, only make the minimum monthly payment (about $58), and your card has an interest rate of 20%.

You may be surprised to learn the true cost of that debt includes: over 10 years to fully repay the debt, accumulated interest of over $3,900, and total payments of about $6,950!

That tropical week away could end up costing more than double its original price, and you’ll still be paying it off long after your tan has faded. Even if you made more aggressive payments of $200/month, it would still take about 18 months to pay off, and you're interest costs would be nearly $500.

We all need a break, but the key is planning and saving. A smarter vacation strategy would be to set a vacation budget and start saving months in advance to fund it. You could also travel during the off-season or locally as an alternative way to cut costs.

If you must use a credit card, pay it off immediately or use one with 0% promotional APR, but only if you can pay it off before the promo ends.

Vacations should bring peace, not long-term financial stress. Remember: if you can’t afford to pay for it now, it might not be the right time to go. Learn to travel debt-free and let your money work for your future, not just your Instagram feed.

Wendy Bennett is a senior financial adviser at Bennett Associates Wealth Management in Butler. Bennett Associates is a registered investment adviser and does not provide any legal, accounting or tax advice. The material prepared is the opinion of the author and for informational purposes.