But you can stand out from the crowd by avoiding a common credit card mistake this summer.
According to a recent survey from Bankrate, 30% of Americans expect to spend more on travel this year than they did in 2023. And 39% expect to spend about the same.
The fact that more people are getting out to explore and make memories is great. How the survey respondents indicate they're planning to pay for it is … not so great.
The survey indicates that more than 1 in 4 Americans will go into debt to enjoy travel this summer.
In this article, we’ll look at what this survey says and help you avoid some of the potential pitfalls of paying for your travel with plastic.
Survey Says Americans Are Planning To Go into Debt for Travel in 2024
The data from the Bankrate survey is clear: Many Americans are planning to travel and have fun this summer, even if they can't afford it:
"According to a new Bankrate survey, 44 percent of U.S. adults expect to spend more on at least one fun purchase this year, while 38 percent say they would go into debt for at least one of these purchases. Further, more than one in four (27 percent) would be willing to go into debt to travel."
The survey indicates that younger people are the most likely to overextend themselves in the name of fun in 2024. The survey says 44% of Gen Z and 37% of Millennials are expected to spend more on travel in 2024 than they did in 2023.
With the price of travel high and credit card interest rates even higher, this could be a recipe for financial disaster if balances aren’t eliminated promptly.
Why Running Up Credit Card Balance for Travel Is a Bad Idea
So what’s the big deal with a little debt in exchange for a little fun?
Well, it’s mostly about the interest rates involved.
Rewards credit cards, which is what many people use for booking travel, can have an APR of more than 25% on new purchases.
As I explored in a recent article about consumers accruing credit card debt by chasing rewards points, the result of these interest charges can be hundreds, if not thousands, of extra dollars you'll actually owe for this vacation.
So, even if you found a great deal on booking a flight, you're likely negating the discount (and then some!) by carrying a credit card balance to pay for it.
And forget about offsetting the interest with credit card rewards: You're likely look at a one-time 2-5% reward on a purchase that is costing you more than 20% in interest each month the balance remains. The math is not in your favor.
As money expert Clark Howard loves to tell people on his podcast: No one ever got rich paying interest on their Mastercard or Visa purchases.
So what should you do instead? We recommend that you create a budget and save money in advance of your leisure travel. Even a small amount of planning and saving in the months ahead of an anticipated vacation can go a long way in paying for the trip.
That way you can enjoy having a blast rather than worrying about the bill coming due!
Credit Cards Do Still Have a Purpose for Travel
While we do strongly advise against leveraging credit card spending power to fund your next vacation, that doesn't mean that Team Clark is against responsible travelers using your plastic to make those purchases.
In fact, using a credit card to pay for your travel can unlock some advantageous consumer benefits. But you must pay the bill in full for the benefits to be worth it.
Here are a few common benefits to using a credit card for travel:
- Cash back or travel rewards points: The most obvious benefit of paying for your travels with a credit card is the potential to earn cash back or rewards. If you have a cash back credit card, you may be able to earn 2% back or more on all your purchases. If you have a travel credit card, you may be able to earn even more than that for travel spending. Clark usually recommends using a generic travel card, such as the Capital One Venture X Rewards Card, instead of a brand-specific hotel or airline card. This way you can shop for the best deal on a flight or room regardless of brand.
- Avoid currency conversion and transaction fees for international travel: Many credit cards offer the chance to make purchases abroad with no foreign transaction fees. Using one of these instead of a debit or credit card that doesn't offer it will save you between 3-5% on every purchase you make while out of the country. Having one of these can help reduce the need for currency conversion, which can be costly for cash payers.
- Travel protections: You can receive card-backed insurance on things like trip cancellation, auto rental damage and lost luggage by paying for your trip with select travel credit cards.
- Priority status and upgrades: If you are the type of person who is loyal to one particular airline or hotel chain, using a co-branded credit card may unlock upgrades and increase your "status" with that particular rewards program. Some higher-end cards also offer you complimentary access to airport lounges during travel.
Are you planning to travel this summer? What is your plan for paying for it? Do you have tips to help others avoid making a credit card mistake? We’d love to hear your thoughts in the Clark.com community.
The post Too Many Americans Will Make This Credit Card Mistake in 2024 appeared first on Clark Howard.