Vacation now; pay later? 57% of travelers in a recent survey say they plan to fund one or more vacations this year with their credit cards. This is while personal debt continues to rise, almost as fast as cards’ annual percentage rates.
Vacations remain at the forefront of consumers’ minds. In a 2023 Spring and Summer Travel Report, TransUnion found that 46% of those surveyed intended to travel more than last year.
Some 82% of those who are currently planning a trip report actively saving up for it. However, according to a recent Accrue Savings study, one in five consumers has gone into debt to pay for vacations. The fintech company’s data also shows 81% of those travelers accrued over $500 of debt in vacation spending.
In a 2023 report, Credit Karma found that 76% of Gen Z respondents born in the late 1990s to early 2000s were willing to take on debt to fund summer travel and holiday vacations.
Budget-friendly travel experts are tackling this vacation debt issue with tips and tricks for managing vacation-related expenses. Strategies like expense-tracking apps, unexpected destinations, and travel reward programs make it easy to budget and save for trips without going into debt.
Debt On the Rise
This questionable strategy many consumers have adopted – “buy now, pay later” – further compounds the expensive issue of carrying account balances and accruing costly interest charges.
CNN reports that American credit card debt levels hit an all-time high of over $1 trillion in August 2023. A Federal Reserve Consumer Credit Report shows the 2023 national average of credit card annual percentage rates (APR) is over 20%. This rate significantly increased from the roughly 16% credit card APR average in 2018.
How to Manage Travel Expenses and Vacation Debt-Free
Many travel and money experts recommend creating a specific account to save money for vacations and travel expenses. Whether money is contributed on a regular or sporadic basis, having a travel fund makes it easier to prioritize and manage vacation plans.
Set Aside Money in Advance
Michael Hershfield, founder and CEO of Accrue Savings, suggests setting financial goals and identifying potential areas where money could be saved in preparation for an upcoming trip.
Travelers should start with a clear plan for how much money they’re able and willing to spend on the next vacation. Work backward from there to start budgeting and saving for the trip before it’s time to pack your luggage and hit the road.
Robyn from A Dime Saved recommends travelers, “Sit down and figure out realistically how much you can put away each month. Take this amount and put it in a separate account. Once you know how much money you will have to spend on vacation, you can start planning a trip that fits your budget.”
Book Your Trip Early
ClearOne Advantage recommends booking vacations at least three months ahead of time to save money. Reserving transportation, accommodations, and activities early ensures the best pricing and more time to research and take advantage of travel deals.
Allowing a comfortable timeline to plan and execute vacation goals will prevent a scramble for cash when booking travel. Planning trips in advance will also help consumers avoid relying solely on credit cards and raising a significant account balance.
Use Money-Saving Apps and Tools
There’s no shortage of platforms dedicated to helping people travel worldwide on a budget.
Travel-specific tools can help consumers save while booking transportation and accommodations. RatePunk, for instance, is a free browser extension that searches the Internet to provide the best pricing on hotels and Airbnbs worldwide. Mobile apps like Hopper, meanwhile, compare budget-friendly flights, hotels, and rental cars to identify low prices.
“For flights, I’ve found that the best website is Google Flights,” recommends Augustinas Milaknis, head of PR at RatePunk. “It’s an extremely user-friendly platform that helps you find the best flight deals, explore destinations, and set fare alerts for price drops.”
Take Advantage of Travel and Credit Card Reward Programs
Travel and credit card reward programs can help save significantly on vacations if used responsibly. It’s important for travelers to identify vacation goals and research different programs to find the best option for their lifestyle. Consumers can enjoy discounted or free flights, hotels, and rental cars if spending is managed appropriately.
Many credit cards offer travel reward programs where participants earn cashback or points that can be redeemed when booking vacations. For instance, travelers who want to plan an epic Morocco trip and browse riads in Fes should book their stay using rewards whenever possible.
Frequent traveler Karee Blunt says, “Since flights and hotels are usually the biggest part of our travel budget, learning to use credit card points has been a huge game changer. We rarely pay for flights or hotels between the Southwest Airlines Companion Pass and Chase Ultimate Reward Points. Last year, we flew to Puerto Vallarta for four nights to stay at an all-inclusive hotel, and the entire vacation cost us less than a typical dinner at a restaurant would have. That’s my favorite trick for staying out of debt while still enjoying traveling.”
Explore Unconventional Destinations and Experiences
Travel influencer Elise Armitage of What The Fab, a member of the diverse travel blogger group Babes That Wander, suggests exploring outside-the-box destinations. “Sometimes unexpected places and hidden gems end up being our favorite trips. Of course, Italy is iconic and beautiful, but it will also be expensive. There’s something exciting about discovering a lesser-known destination you don’t see all over Instagram, and it will be far more budget-friendly.”
Fortune reports that many families are exploring creative ways to reduce travel costs, including driving rather than flying and staying with friends and family. Consumers can also implement money-saving strategies like packing a weekender bag rather than checked luggage to avoid extra flying fees.
Travelers who don’t want to deal with the logistics and price of cross-country or international vacations can alternatively plan a staycation. This increasingly popular travel choice involves staying close to home but treating the experience as an exotic getaway. Staycations offer a unique way to explore new destinations in your area from a tourist’s perspective rather than a local one.
“My partner and I used credit card rewards for a hotel stay for our anniversary in February that was only 15 minutes from where we live,” says Jessica Bishop, founder of The Budget Savvy Bride. ”Just removing ourselves from the day-to-day grind was exactly what we needed, and we didn’t have to worry about hefty transportation costs like flights or rental cars.”
The Future of Debt-Free Travel
As credit card debt levels in America continue to soar, consumers can implement money-saving strategies to save on vacation expenses. Tools like budgeting apps and points-based reward programs can help make debt-free travel a reality.
Elise Armitage is the founder of What The Fab, a travel + lifestyle blog based in California, founded in 2012. At the beginning of 2019, Elise left her corporate job at Google to chase her dreams: being an entrepreneur and helping women find fabulous in the everyday. Featured in publications like Forbes, Elle, HerMoney, and Real Simple, Elise is a firm believer that you can be of both substance and style.