It’s amazing how enticing those cruise ship photos and relaxing beach images can be as you scroll past them. If you’re like most Americans – 74 percent, to be exact – you’re willing to go into debt to create a few of your own social media-worthy vacation photos. Summer vacation credit card debt averaged $1,108 in 2017, and it’s likely many of those credit card holders are still paying for the vacation from 18 months ago.
As we spend more time at the office and less time with family, we justify the expense. The average full-time employee works 47 hours a week, and that doesn’t include the special projects, overtime and work you complete at the kitchen table. Creating a balance is hard, so we try to build memories through a week of travels that we really can’t afford. We prioritize vacation over finances and prolong the never-ending cycle of having to work even more to pay off the exotic island or Disney World debt for months, even years to come.
Lingering Summer Vacation Credit Card Debt
Ideally, no one ever wants to carry credit card debt. When you use a card, you plan to pay off the monthly balance during the statement period to avoid accruing interest. But Christian Debt Counselors understands life isn’t always ideal. We all run into unforeseen circumstances and situations beyond our control. However, using your credit card to pay for a summer vacation, is very different from covering the expense of a plumbing emergency.
The major challenge with loading up a credit card to pay for your summer vacation is you’re not just paying for the seven nights in an exclusive resort. Once the interest sets in, the debt continues to grow. Take the average vacation debt for example. The $1,108 placed on a credit card with an interest rate of 14% (the average on all existing accounts) will cost you 36 percent more than the vacation price. If you make a minimum monthly payment of $25, it will take you 58 months to pay off your debt. In that time, you will pay $402.90 in interest charges. Of course, that’s if the credit card you use doesn’t already have a significant balance.
In addition to the interest rate fees and years it will take to pay off the debt, you affect your financial standing in other ways when you use a credit card to fund your vacation.
Lower Credit Score:
Your level of debt is the second biggest factor in how your credit score is calculated. Creditors consider your credit card balances compared to your credit limits to determine how financially responsible you are.
Difficulty meeting monthly expenses:
As your credit card balances increase, so do your monthly minimum payments. When more of your income is dedicated to paying credit card bills, money needed to cover necessities like groceries, rent, and the car note is tight.
Paying off high-balance credit card debt means you have less to put back in savings. Like 20 percent of Americans, you’ll end up with more in debt than in an emergency fund.
The effects of summer vacation credit card debt can be long-lasting, but it’s not all bad news when it comes to planning your get-a-way.
How To Budget For A Summer Vacation
Vacations aren’t cheap, but that doesn’t mean warm sun and relaxation is out of reach. To avoid going into debt, use our step-by-step guide to budget for your vacation.
1. Pick a destination.
With all the websites that offer “last-minute deals,” you may think it’s better to wait until you’re ready to travel to book your stay, but that isn’t the case. Choose your destination 4 to 6 months ahead of your planned travel. Start with three or four desired destinations and then plan from there.
2. Research the cost.
Bloggers flood the internet with vacation experiences and reviews. Use those websites, as well as sites of the places you want to visit, to determine how much money you’ll need for travel, lodging, food, activities, and spending money. When you have an estimated budget for your possible vacation locations, choose the one that’s most financially feasible for your family.
3. Create a vacation savings fund.
Automatically draft a set amount of cash into your vacation fund each pay period. When the money is automatically deducted, you won’t forget to set it aside or be tempted to spend it.
4. Sign up for emails.
Visit the websites of local attractions you want to visit on vacation. Sign up for emails, which often include ticket discount offers or special rates to help you save money.
5. Leave the credit cards at home.
When it’s finally time to set sail or hit the theme park, leave the credit cards at home. The vacation setting can spark impulse buys that you’ll later regret when you get the credit card bill. Stick to your budget and only use the cash you worked so hard to save.
Everyone’s financial situation is different. You may have lingering credit card debt from charges accrued long ago that stop you from saving for a family vacation. Tackling your debt doesn’t have to be life-stopping and you don’t have to do it alone.
How To Handle Credit Card Debt
Credit cards are designed to reel you in for as long as possible. With low minimum payments and attractive 0% APR offers, it’s easy to be misled by the illusion that you can live outside your means and quickly pay off the debt.
Credit card debt happens to good people. The trusted team at Christian Debt Counselors can help evaluate your credit card debt, lower your monthly costs, and consolidate your payments. Balances on high-interest cards seemingly never decrease because so much of your monthly payment goes toward interest. Stop stressing over credit card debt and allow our team to help create a new financial future for you and your family.
By taking this step today, you’ll be closer to planning the summer vacation you dream of for your family – a vacation that you can relax and enjoy.