More than a third of Americans borrow money for their summer vacation. Make it wise
Can it even be true that 36% of Americans “plan to take on debt for summer travel” – can someone please explain this to me?
More than a third of summer vacationers say they are willing to take on debt to pay for the trip, 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.
…According to Bankrate, Millennials (47%) and Generation Z (42%) are the demographic most likely to say they plan to go into debt to finance a vacation.
I am quite against getting caught up in excessive spending. I write about the wisdom of not buying anything on Black Friday unless it is something you will buy it anyway it’s simply sold cheaper. And I write about how you should be careful when collecting miles that you don’t spend more as a result.
I have a slightly puritanical instinct that people should forego a vacation if they can’t afford it, but I actually think that in some cases it can make sense to borrow money for a vacation:
- Income smoothing. Maybe you’re waiting for a year-end bonus, but it makes sense to book peak-period travel in advance. You get the bonus over the holidays and travel over the holidays, but fund the trip until then.
- Wealthy, financially weak. You have the money for a vacation, but you don’t want to liquidate any assets at the moment – perhaps the funds are tied up in private stocks or you have made capital gains that you don’t want to realize immediately.
However, this does not apply to more than a third of people!
But borrowing money for vacations is more common than you might think – I just wouldn’t put the number as high as the survey suggests. Up to 15% of people finance the vacation packages they book month after month on airline websites. That’s almost enough to understand Dave Ramsey’s bad advice. But still less than half the percentage of the general population reported. (I suspect many of them would go into debt for road trips.)
If you borrow money for your vacation, at least don’t do it as part of a “vacation ownership” (i.e. timeshare). Also, don’t finance paid upgrades on Delta.
Am I out of touch with reality when I think that many people who borrow money for a vacation would be better off not taking the trip? What do they think and does that make sense?
