Can this even be real, that 36% of American’s “plan to take on debt for summer travel” – can someone possibly explain this to me?
More than one-third of summer vacationers say they are willing to take on debt to pay for travel, according to a March 2024 report from Bankrate.
About a quarter (26%,) of summer travelers said they intend to use a credit card and pay for the vacation over multiple billing cycles.
…Millennials (47%) and Gen Zs (42%) are the demographic cohort most likely to say they plan to go into debt to pay for vacation, according to Bankrate.
I’m pretty against getting trapped into overspending. I write about the wisdom in not buying anything on Black Friday unless it’s something you were going to buy anyway that’s simply being sold for less And I write about being careful in accumulating miles that it doesn’t cause you to spend more.
I have a bit of a puritan instinct that people ought to deny themselves a vacation unless they can afford to pay for it, but I actually think it can make sense to borrow money for vacation in some cases:
- Income smoothing. Maybe you’re waiting on a year-end bonus, but it makes sense to book travel during peak periods in advance. You’re going to get the bonus over the holidays and travel over the holidays, but finance the trip until then.
- Asset rich, cash poor. You’ve got the money to cover a vacation, but it’s not convenient to liquidate assets right now to pay for it – maybe funds are locked up in private stock, or you’ve got capital gains you don’t want to recognize immediately.
This doesn’t describe over a third of people, however!
Yet borrowing money for vacations is more common than you might think – I just wouldn’t peg the number as high as the reported survey. Up to 15% of people are financing the vacation packages they buy from airline websites omonth after month. It’s almost enough to make you sympathetic to bad advice from Dave Ramsey. But still less than half the claimed percentage of people overall. (Many of these would be taking on debt for road trips, I imagine.)
At least if you’re going to borrow money to vacation, don’t do it as part of ‘vacation ownership’ (i.e. timeshare). Also, don’t finance paid upgrades on Delta either.
Am I out of touch to think that many people borrowing money for vacation would be better off not taking the trip? What are they thinking, and does it make sense?
What’s the historical answer to this question?
It does seem odd. But I see it happening, especially in the 20 to 45 demographic of single adults chasing insta-FOMO and young families spending large amounts on Disney and other “worry-free” experiences.
There are websites where people brag about snagging high end awards — Maldives etc — for “free” when actually they overspent on points to the degree that a cash purchase would have been the better economic choice. The power of bragging rights I guess.
It’s good to seek out new sources of information and tap into the psyches of others, especially those we don’t normally interact with and whose life choices seem odd.
But closer to home? I take these as more data points that travel spending is at unsustainable levels and likely to decrease going into 2025.
As a retired banker I would never lend for a vacation. If you cannot afford a trip then a Staycation should be your obvious fallback. A third is a very high number and is really sad.
It’s another symptom of the infantiliztion of today’s adults. Instant gratification. No regard for consequences down the road. The “I want it now” mentality.
Don’t look for a rational explanation to irrational behavior.
“Am I out of touch to think that many people borrowing money for…?”
Yes, a similar thing happens every year for Christmas.
Some people with access to credit use it as a buy-now-pay-later (this year) tool. Others use credit to make bad decisions and build debt.
I think the author, whether intentionally or unintentionally, spoke in a demeaning manner to those with less money. You just might be out of touch. And since you didn’t ’price point’ the spending or vacation it makes matters worse. People deserve a break, a rest or a vacation. Hopefully they have budgeted the cost and are being careful. Not everyone has excess but everyone does deserve a break so let’s be a little kinder and more understanding of income parity.
I agree with jl about being in a society that encourages instant gratification, but may be only part of the problem. As a teacher I would say that most young people get very little training in how to manage money, budget, etc. In classes with high school graduates I usually bring in the concept of compound interest. I go over how to apply it to both long-term savings and debt. Maybe 1 in 5 comes in with a vague idea about this subject, perhaps 1 in 10 understands it well enough to make good decisions.
Being able to buy appropriate insurance or big ticket items, know when they are being sold a scam or make many other decisions involving their financial future are topics sadly lack in today’s schools. And from what I have seen I think they are rarely explained well (if they even know it) by their parents. My wife (with an MBA) did things right by letting our kids make some small scale bad decisions, and when they complained she said that was so they would learn early on how to make good choices. It worked too, but how many families do that?
The buy now pay later crowd is at the airport, concert arenas, sporting venues, etc. . At some point, that bubble will burst.
Why not? Nobody’s really responsible for their debts anymore anyway.
I am not surprised. There is a lot of at least perceived uncertainty this year. With that, people will act similarly to facing real sustained inflation and move forward the timing of their desired experiences even if it means financing them. Not the right answer for most, but these are strange times.
With all the problems and wars in the world people might want to enjoy themselves before all the good stuff isn’t available anymore.
@drrichard, yes … financial literacy (or illiteracy) is a big factor.
I can’t help but agree with @jl, @Bob McGurty, and @drrichard.
While this is appalling because of the scale it’s not a total surprise. Gary, you’re substantially better off than most people and it sometimes doesn’t strike you how that might change perspectives and behaviors. Financial literacy is not all that common among less affluent people and without that literacy and/or discipline it’s tough for people to tune out targeted ads that are molded to prey on their psychological weakness and just stay home or go camping. I don’t think going into notable debt to go on vacation is a prudent decision by any stretch but in a lot of cases people want hope and at least the appearance and feel of normality and going on vacation provides that.
@David and @SDRon
I agree the degree of perceived uncertainty is driving a strong spirit of living for now.
Not to say there isn’t also a degree of financial acumen … or lack. Just that people have long been poor at making fully informed financial decisions.
It’s about $6,500 to $8,000 on the cheaper end for a family of 4 to spend 7 days at Disney World (https://www.nerdwallet.com/article/travel/disney-family-vacation-cost). Now, add airfare. How expensive is 4 to Europe for a week?. I know I’ll come off as an old fogy, but put everybody in a car and drive off to some rented lake/seaside property and save thousands. The parents will have less tension. The expensive experience is wasted on the young. How much better off will your 1 and 3yo be if you split $4,000 or more in savings between two college funds (or the payments you make to pay back $4,000 on a credit card)?
a friend from college, definitely a Type B, I’m guessing he makes less than $100,000 a year, just came back from visiting Fallingwater, the Frank Lloyd Wright house in Western Pennsylvania. And mentioned that he had over $30,000 in credit card debt. I’m guessing 24+% interest. How does a credit card company let that happen, and has Big Medicine invented a pill that stops stupidity?
The government is teaching people it will take care of them. Oh! housing crisis? We’ll forgive mortgage loans and not even tax on the forgiveness. Oh! student loans got your down? Let’s write them off. You want filet minon and a nice cabernet? Steal prime and the best wine from the local grocery store. Noone will stop you. You want a nice house? Squat! You have *RIGHTS* to do so. So why save? Why work harder? Social security won’t be around (I’m counting on it though), so spend now and have the government take care of you. Oh! are you illegally here? No problem. Go to California for free welfare and healthcare.
Without faith that the future will be better than the present, that hard work will make the vacation worth more because you earned it and Instagram poking you to keep up with the Joneses – whether or not they are just stock pictures, debtors will only go further into debt. Sadly austerity is a tough pill to swallow and many never do take it. So expect crime to rise and at some point, consumer credit to crash. Then what will we do when the ATMs stop working due to the resulting banking crisis and noone has cash as it’s not accepted anywhere anymore?
We live in modern society where people are encouraged to by a bigger house than what is actually needed, a fancier more decked out car than what is needed for transportation, etc. Unfortunately, people are not encouraged to live within their financial means … and even the affluent often fall into the same trap.
So, while the purported numbers are surprising, I am not shocked that some will go into additional debt for a vacation. So many look at cost in terms of a monthly payment ( ie. Car, house, added features to a house) and disregard the actual cost – even excluding interest – of a product or service.
Yes, it’s important that people take time off to relax, have a vacation, pursue other interests, but do so within your means.
The rationalization in some of these comments really speaks to the “I deserves this”, “I want it now” mentality.
Doesn’t sound like many people would pass the “marshmallow test” these days.
(Google it)
“Am I out of touch…?”
Yes, Gary, you are out of touch. Actually, I am surprised those numbers quoted aren’t higher. Among my 31 y/o daughter’s successful friends, I don’t know of a single one who isn’t charging their annual or semi-annual vacations. Why wouldn’t they? Tomorrow’s dollar (debt) is going to be worth less, and their wages will likely be worth more, so, why not? And maybe they are putting it on Afterpay, or Affirm, or one of those BNPL services. Also, the younger folks – under 40 – look around and see the geezers who forfeited life experiences for home ownership, and because home ownership now looks impossible, why not compensate with life experiences?
This isn’t the way I look at it, I’m actually a frugal geezer, but hearing from my adult daughter’s peers, I can understand their point.
These surveys are a bit confusing sometimes in terms of what “going into debt” means. Increasingly, I know a lot of people with positive paper net worth that seem to go into very meaningful credit card debt at various times of the year, or have permanent revolving debt. For example – let’s say someone has a $200K 401K, a $100K Roth, $100K in home equity, but “goes into debt” for vacation, and has $50K in credit card debt. And let’s say this person makes enough money to cover all debt payments while still contributing fully to a 401K. A lot of this “36%” may fit into this category – basically people with high income running with fairly high leverage.
Fly now, you might be locked down Tomorrow..
My father’s generation charged family road trips on gas station credit cards which carried a lower interest rate.
Dickensian rants notwithstanding, let’s not forget that personal fortunes and entire industries have been founded on profits derived from the poor decisions of others.
They fund our point redemtions thru their poor debt management.
And at least for now they fund the airlines and travel industries with their over consumption.
How many of those 36% are same people trying to justify the behavior on this thread? FOMO is strong in our society.
When I was young and poor, I did not have credit cards due to not being able to get them. So my vacations were mostly weekend solo ones that included a lot of driving. Out of the Los Angeles area I ranged as far as New Mexico and Colorado on three day weekends. True vacations of a week or more were also low cost driving ones. On a two week vacation I drove across the USA and back. There is no sense feeling sorry for the younger generations piling up debt. They have made their choices and should live with the consequences.
I always pay for vacations with credit cards strategically with the cards that will yield most points based on spend category. Difference is I’ll pay the balance in full immediately, not over “several billing cycles” as described in article
Many of you have likely never been poor.
I’m not talking the-money-is-in-CDs-so-I’m-low-on-cash… I mean poor.
Working poor families have children. Kids want to go to the beach in the summer.
And because they are kids, and their parents love them… So they borrow to make that dream real.
Because those memories will last a lifetime, not just the payments it takes to make that happen.
@ Gary — Not to worry, they will alll go broke and crash the economy, but the government will bail them out, leaving repsonsible people holding the bag as always.
Tone def post. Not everyone gets a truckload of money at 13th bday and enters post high school or college debt free. To each their own. Most people make bad financial decisions but it’s not ours to judge. You don’t carry your money with you into the afterlife.
I think a lot of folks are missing the big picture here. For 2 to 3 years, Covid caused many missed vacations, canceled family reunions and even delayed weddings. Then the Biden regime came along and caused massive inflation of around 30%.
Folks are very impatient. How long do you expect people to keep their lives on hold? People need to take a break and enjoy themselves at least once in a while.
Lot of tinfoil hat types playing up familiar welfare tropes up in here
What percent of Americans are debt free? If there were no credit cards, what would you be able to affird?
I think we can leave the sanctimonious tone at home. If you take advantage of credit card rewards, then you do so at the expense of this group. Credit card rewards are a wealth transfer from the naive to the financial gamers (just like huge chunks of active stock market investing). The Federal Reserve Board report in 2023 made this clear. All the moralizing is just what allows you to pretend that you deserve those rewards because you are better than the other people that make bad decisions and it isn’t really your fault. That’s why I really hate the moralizing tone. I’m taking advantage too, but I know it only exists at the expense of others. And the bank (the house in this gaming simulation) always gets its share of the rake.
There are lots of reasons people finance all kinds of purchases with debt. Some reasons seem better to me than others. But I understand why people who don’t currently have a bankroll want to take a vacation and are willing to pay some interest to make that happen. The question of sustainability is not one that can be answered with this statistic. Instead, it is answered by the very savvy risk management departments of banks that have a hell of a lot of consumer information. The “buy now pay later” crowd says nothing when it is a leveraged cash poor business that buys 5 restaurant locations nobody needs (then blames the government for taxing some “poor business owner” that made a bad bet in an insanely competitive industry with an inferior product. It isn’t wrong when someone who buys a home without cash (the very definition of “pay later”). Yes, some of the businesses and our homes get better terms, but they usually come with security guarantees of some sort.
So be happy. Most of you benefit from this financial arrangement. Just don’t moralize like you never wanted it to happen. You can’t eat bad lounge food on Amex’s dime unless the induced spending from the Platinum credits actually works to send some poor soul into debt to pay for their Saks habit and unnecessary Equinox membership.
“Don’t look for a rational explanation to irrational behavior.”
Their behavior is rational. Someone (mommy or daddy) or something (maybe the USA government, lawyers, charities or the courts) has always bailed out their bad decisions.
@jns – You’re getting pretty smarmy and sanctimonious. I guess nobody ever helped you out. With the chip on your shoulder I can understand why, even if they should have. People make plenty of bad choices without getting bailed out.
Not really a surprise.
A lot of American families have minimal savings but have young kids off from school. And so some parents too are taking some time off in the summer with the kids and then run up the debt for vacation during the summer but either go less or don’t go on non-VFR vacations during the rest of the year. And given what has gone on with rents and housing costs for a substantial proportion of American families with heads of household under 45 years of age, running up debt is what is tiding over a lot of them.
Have you seen what childcare costs are like across the country for working age moms in particular? It’s a huge cost burden to add on top of the other cost burdens.
The working middle class and the poor in America aren’t the recipients of massive government bailouts like the big banks, big industry and other US Chamber of Commerce types with the politicians, the bureaucrats, the Federal Reserve and the federal courts all stacked in the favor of even failed business players at the expense of others.
What happens when the govt devalued the currency thru inflation and the system is rigged is that ppl get poorer. This is delusional to take on debt for a vacation. What they need is a reality check that they are poor and being ground up by the machine.
I call out poor training in financial literacy. I used to have a personal trainer who was retired military.
At the time I was renting a luxury home because the net cost was well under half the cost of owning, and he could not get past the concept , drilled into him through years of financial “training” offered by the military, that “you’re throwing away money by renting and building equity by buying.”
I kept hearing how I’d be better off buying. In the end prices crashed and I WAS better off buying ….bought the rental I was in for half the cost of building it only a few years earlier.
Despite a health retirement income the military guy is still living from check to check.
@Dave W, That estimate of 6,500 for a “frugal” 7 day Disney trip is misleading as it assumes that have to stay on Disney property. With savvy can cost lot less. My family of 3 just got back from there using the current summer deal of $396 per 4 day single park ticket and using jetblue points to fly there from nyc and Hilton points to book 5 nights at the very nice Waldorf Astoria with almost free breakfast due to diamond status from holding amex aspire.
Total out of pocket expense was around $2500 for whole trip (just mostly attributed to theme park tickets and food). By being strategic can be much less and still nice and even luxurious
There are some very wealthy people whose tax game is very much about borrowing a lot against appreciated assets and their yet unrealized gains (for tax purposes). Technically, the debts are run up by the very asset rich wealthy in order to spend on needs and wants while allowing the appreciated assets to be used as capital to get money to make money for a longer period of time and with a stronger compounding purpose by postponing the realization of the appreciated assets’ gains for tax purposes.
I find it noteworthy that an American whose net-worth increased by $100 million dollars or more last year can pay a lower percentage of their income as tax than a couple of retired NY public school teachers living in NYC.
@kimmiea “Tomorrow’s dollar (debt) is going to be worth less, and their wages will likely be worth more, so, why not?” The second point is possible. I incurred debt to make my life easier while a doctoral student, knowing the highly increased wage on graduation. I chose right. Most people following that strategy will be wrong. The first part is lunacy. Yes, the $100 I borrow today has more value than $100 I might have to pay in the future (inflation). That doesn’t work if I was incurring 20+% CC interest rates.
“This isn’t the way I look at it, I’m actually a frugal geezer, but hearing from my adult daughter’s peers, I can understand their point.” I can see they are using lousy arguments that will not IMHO be in their best long-term interest. So long, as the don’t expect me to pay, go ahead and face a future with fond memories of the days you could afford human food.
@Luke. Fair enough, your out of pocket was low, highly because you used rewards it seems. You were at the park where many families—some of them going into CC debt to do so—spent at least twice that sans reward program benefits for hitel and flights.
To all those making the “you’ve never been poor” argument. I don’t know and can’t speak for others here, but I have lived paycheck to paycheck with an outstanding credit card balance on which I paid the minimum. Still, that may not give me credibility to some, because I worked/saved myself out of that last century. Or, just try this, maybe we evaluate a person’s arguments. Part of the reason I am no longer poor is that I didn’t spend money on vacations I couldn’t afford without incurring CC debt. I hate seeing others doing that; I actually care for them.
No, you are not wrong. Taking on debt for a vacation is wasteful and short-sighted. Budget and save for it. Once you have had your vacation, all you have to account for it are memories and photos. On the other hand, if you buy a new couch for the living room , it’s there for many years and you can touch it and use it every day. The vacation is an ephemeral memory, which will fade over the years. Cheers.
I blame avocado toast and grande lattes for all of the debt.
I think the AA flight attendants should be fired
I’m quite thankful for these fools paying full retail so I can redeem points and fly/stay for free.
When we couldn’t afford the trip of our dreams, we adjusted our dreams. If you can’t afford international, go domestic. Shorter trips. Cars, trains or buses go to many destinations. Next year you will have more disposable income.
Instead of giving so generously to your kids, pamper yourself once in a while. And when you retire, live where you want (like in Europe). Cheaper when you already live in Europe.
I seem to recall Americans under a mound of debt a few years ago. Will likely happen again.
Many people have been going into debt for all sorts of expenses on wants. It’s depressing, yet these overspenders are what allows me to get cashbacks or travel on points.
Without some societal engineering, the gap between the haves and the have-nots will grow until an untenable situation is reached when it’s often violent and stability collapses.