According to an Experian study on how people pay for their travel, 46 percent used a credit card when they had not saved for their vacation. Out of all travelers, 68 found they were spending more than they had budgeted for their trip.
At Grand Canyon Advisors, a firm that helps people with debt problems, we get asked many questions about travel and credit card debt. The following is some advice on how to relax and have a vacation and avoid piling on more credit card debt.
The Problem
According to the Washington Post, there are millions of people in our country who cannot afford to go on a vacation. But, Forbes reported that 70 percent of those surveyed who carried credit card debt were unwilling to even reduce their travel expenses by 50 percent. They found that the average family carrying credit card debt spent $2,111 per year on their travel.
The Washington Post suggested that the idea of some paying for a vacation when they were not making payments towards their children’s college educations or towards retirement simply does not make sense.
Why Credit Card Debt is Bad
Forbes reported that the average credit card debt balance being carried by Americans in 2019 is $5,700. The average consumer credit card interest rate, as of October 2019, is 22 percent. At such high-interest rates, it gets really hard to pay down the balance because you are mostly paying interest every month. In fact, if you had a goal of paying the average credit card balance in America off in three years, it would take a payment of $217 per month. Your interest that you will pay to pay off the $5,700 in three years will be over $2,000.
The problem today is that the credit card interest rates are too high to use them as viable credit sources. This was not the case two decades ago.
If you lose a job in an economic downturn, as many did in 2008, you may not be able to make the payments, which will harm your credit and your ability to purchase needed items in the future, such as a car and a home.
Some Solutions
Staycations
The Washington Post advises that people find new and unique vacation solutions in one’s own area in order to reduce the cost of holidays.
Make a Payment Before You Leave
The U.S.A. Today suggests that travelers make a payment on their credit card before they head out on vacation. This is to keep their credit utilization below 30 percent. If your vacation puts your credit utilization ratio over 30 percent, and you are not able to pay off the balance within a few months, you risk your credit score going down. This will make it tougher to get other sources of credit you need at a favorable interest rate in the future, such as an auto loan or a mortgage.
Save for Vacation –
The U.S.A. Today also suggests saving for a vacation with something that is foolproof, such as an automatic transfer of funds into a savings account each month.
Find Ways to Save Money on Vacation
Simple things, like taking a cooler for snacks and cold lunches can save money, so you aren’t hitting a restaurant for all of your meals. If you are vacationing in the U.S., it doesn’t hurt to check the Groupon or other online coupon vendors for savings on some of the restaurants you will frequent. Of course, checking for the best prices online for air fare and hotels is a must.
The idea of having “priceless” adventures with credit cards on a vacation splurge may not be realistic when it involves having to carry a balance. If you are struggling under heavy credit card debt, call us at Grand Canyon Advisors. We have solutions that will help you get out from under high interest rates
