Many people love to travel. The problem is that too many people accrue travel debt that will financially harm or cripple them with high-interest rates when they return home. Today, typical interest rates on credit cards are around 16.9 percent, according to CNBC. At that rate, it is really hard to ever pay off the amount you owe, and that may very well be the idea.
With the problem in mind, then we have to ask, “Is it best to simply not travel while I have debt?” At Interstate Associates, a financial advisor to people in debt, we say that the answer to this question is dependent upon your situation.
Begin With Your Budget and Repayment Plan
In order to answer this question, you need to have created a budget and a repayment plan. If you don’t yet have a repayment plan and budget, NomadWallet suggests you avoid traveling until you have your budget and repayment plan in place, and you know you will be able to make your debt repayments while you are on vacation. It is financially dangerous to take on more debt in order to travel because, for most, travel is not a necessity.
Your budget will take into account all expenses each month, such as housing, utilities, gasoline, food, and other bills. It will also take into account the yearly expenses, like insurance, car maintenance, and registration and clothing.
Your debt repayment plan will look at your budget and see what you can pay each month in order to pay down debt. Since many Americans have too much credit card debt, a suggestion is to consolidate those high-interest debts into a personal loan at a lower interest rate. The idea is to lower your monthly credit card payments with one lower-rate payment. This will allow you to pay down the debt more quickly by paying less interest.
If You Have to Charge Your Vacation, Don’t Go –
A bit caveat is not to charge the vacation on the credit cards and take on more debt.
Forbes explains that one can come back home to debt that is too high to do much more than terminally attack the interest.
NomadicWallet suggests that travelers wait until they can pay for everything with cash. But, they suggest using the credit card to pay while on the trip because it is safer than having a bunch of cash on your person as you travel. Instead, they advise paying off the balance with the cash you have saved for the trip when you return home and get your bill.
A Savings Account or Fee-Free Debit Card Can Hold Your Travel Fund Supply
If you need tangible help to save money for travel, you can use a savings account or a fee-free debit card to store the money you are saving for travel. The American Express Bluebird spends just like any American Express card, is almost entirely fee-free and allows you to accrue funds for your travel into the card’s balance each month. In fact, if you order the card online, it is free. Otherwise, you can buy it in many stores for $5.
How to Get Cash to Travel?
- Why not rent out your place on Airbnb or other rental sources while you are traveling?
- If you are a digital worker, you can earn money while you travel.
Downsize Your Travel
Nerdwallet suggests a few ways to make travel cheaper:
- Stay closer to home or shop online for airfare deals
- Consider staying in a hostel or cheaper accommodation
- Research food options and blend going out with bag lunches
Here at Interstate Associates, we want to emphasize that debt does not mean one should not travel. Instead, we suggest consumers first get their budget and repayment plan in place. Save for your travel and find ways to make your travel more frugal. Then, you can have the best of both worlds, while securing your financial future. Contact us with questions you may have about debt.
