Each month between 10% and 15% of United Vacations sales are made on credit. Since the same credit provider services AA Vacations I assume the results there are similar, though I don’t know their numbers specifically. I found this disconcerting, but not surprising.
Isn’t it a little bit jarring that so many people are financing their vacations? I can think of a few explanations where the decision would be perfectly reasonable:
- 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.
- Despite best advice you’re going to finance a trip anyway, and you’re looking for better terms than your credit card offers.
Is it too Puritan of me to think that people ought to deny themselves a vacation unless they can afford to pay for it? I actually think the first two ‘reasons’ I give above count as being able to pay for it. But if you’re struggling to make ends meet, and can’t cover airfare or hotel, that maybe it would be better to stash away an emergency fund to cover car repairs or possible unemployment if the economy turns south?
Many years ago I wrote that credit card rewards aren’t for you unless you’re able to pay your cards off each month – and the cards themselves don’t encourage spending more than you otherwise would. I like to think that’s how we all behave, but the numbers suggest otherwise. It’s almost enough to make one sympathize with bad advice from Dave Ramsey.