What is a Vacation Account? Everything You Must Know in India

A “vacation account” or a “holiday savings account” is a financial product that allows people to save money specifically for vacations. It allows you to set aside a fixed sum of money regularly so that it later becomes easier to plan and afford a trip. It must be noted that this account is a dedicated solution to managing travel expenses. It helps you to eventually enjoy that dream holiday.
 

Wish to know more? In this article, let’s understand the vacation account meaning in detail and see how it works. Also, we will learn why this approach is better than taking a travel loan.

• A vacation account allows you to save monthly for a planned trip.
  

• Your monthly deposit amount depends upon your chosen holiday package.

• You can deposit money in your vacation account for 12 months.

• Unlike travel loans, which charge high interest rates, a vacation account helps you earn interest on your savings.

A vacation account is a special savings account designed to help you save money for a planned holiday. Once you open this account, you commit to depositing a fixed amount of money every month for 12 months. These monthly deposits build up your savings gradually over time. At the end of the 12 months, there is an added bonus: Thomas Cook, the travel company, contributes an extra payment known as the "13th top-up." This top-up, combined with your 12 monthly deposits, covers the total cost of your vacation. It’s a structured way to save for a trip, making it easier to afford a holiday by spreading out the expenses and getting extra financial support from the company.

In India, while planning for their next travel, a few people prefer to take travel loans. Consequently, they keep on depositing EMIs, which are usually calculated at exorbitant interest rates. This adds to the overall cost of travel and makes your vacation expensive.
 

Instead of doing so, a smarter solution would be to open a vacation account with a reputed bank in India. It allows you to first save and then pay for the trip. On all your savings, you earn a handsome interest. This increases your savings rather than adding extra costs like in an EMI, where you pay more due to added interest.
 

Additionally, the vacation account lets you “save for your trip in advance”. It allows you to lock in the current year’s prices for a vacation taken next year. This makes it inflation-proof as you get to avoid future price hikes.

Generally, you can save in a vacation account for a trip you are supposed to take after 12 months. Just like a recurring deposit (RD), all your savings grow at a pre-determined interest rate. For more clarity, learn in easy steps how a vacation account works:

• Step I: Choose your vacation
  Start by selecting the type of holiday you want, either a domestic or international destination. In this step, you basically decide where and when you'd like to travel.

• Step II: Open a Recurring Deposit (RD)
  To save for the trip, a recurring deposit (RD) account is opened with a bank. In this account, you deposit money monthly. This leads to the accumulation of funds, which are later used for financing your trip.

• Step III: Determine monthly savings
  Please note that the cost of the chosen holiday package will determine how much you need to save each month. This monthly amount becomes your RD instalment.

• Step IV: Save monthly for 12 months
  Currently in India, most banks allow you to deposit money in your vacation account for 12 months. By doing so, you gradually build up your savings for the trip.

• Step V: Pay for your vacation
  After 12 months, your vacation account will mature. Now, you can go on your chosen vacation. The total savings (along with interest) will be directly paid to your travel provider. This will cover your holiday package cost and you are usually not required to pay anything extra.

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