How to reduce credit card debt over summer vacation

How to reduce credit card debt over summer vacation

How to reduce credit card debt over summer vacation

Many Americans take the freewheeling notion of summer as license to spend without thinking. However, we will show you how to reduce credit card debt over summer vacation.

With spending rising precipitously over the summer-especially during vacations-credit card debt can quickly get out of hand. Financial stability plans are disregarded in favor for spontaneous road trips and accommodating surprise visits from family or friends, meaning vacations are not only expensive but financially debilitating.

In fact, many financial advisors recommend that extraneous expenses such as trips, nice meals, and large purchases be accounted for in your budget. Unfortunately, unplanned spending on a credit card with a high interest rate not only makes it easy to lose control of your money, but can quickly spiral into insurmountable debt. To avoid falling into a precarious financial situation this summer, learn how to reduce credit card debt effortlessly, courtesy of Budget Build Buy.

High Spending During the Summer Months

Vacation costs can vary wildly based on the consumer-some prefer to stay at upscale hotels, while others prefer to lodge in budget-friendly motels and prioritize thrifty options. However, in either case, vacation costs can add up very quickly. Considering the cost of travel, lodging, dining, and entertainment, domestic trips can amount to an average of nearly $150 per day, with international travel running up to as much as $300 per day.

There are many factors that determine how much a summer vacation will cost. Statistics show extreme disparity in vacation costs depending on the age of the vacationers. For example, people approaching retirement age are found to spend an average of four times as much on their vacation as compared to people in their mid-20s. Though this can possibly be attributed to travel accommodations designed for greater comfort and convenience, both age groups are susceptible to increasing debt and diminishing capital.

Vacation Costs Rising Every Year

Due to general inflation and the steadily rising prices of hospitality services, vacation costs are at a record high. According to ADI’s 2020 Travel Report, spending on flights and hotels in the U.S. is expected to increase by 5.5% in 2021. In the last year, Americans spent nearly $82.9 billion on vacation, with the majority of that spending occurring over the summer. Summer holidays have proven to be enormously costly on average as well:

  • Memorial Day weekend: $3.05 billion
  • Fourth of July weekend: $3.22 billion
  • Labor Day weekend: $2.92 billion

While spending money during a vacation isn’t a problem in itself, the trouble comes when people deal with the costs by accruing credit card debt. During the early stages of planning your vacation, make sure that you’re fully aware of your budget and only use your credit card when necessary. With vacation-related expenses expanding at a faster rate than economic inflation, you can face tough financial challenges if you don’t know how to reduce credit card debt. Before you embark on your summer vacation this year, make sure you know the basics of how to eliminate credit card debt.

Where You Lose the Most Money

If you can limit yourself to a single vacation over the summer, you’ll have an easier time keeping an eye on costs and managing your budget. Many Americans make the mistake of carefully planning one vacation and sticking to their budget, only to compromise their careful spending with an impromptu second vacation. When prioritizing financial stability, it’s always a good idea to vacation with a specific plan to keep spending under control.

Additionally, international flights are guaranteed to quickly diminish your vacation budget since you’ll need to allocate more funds to travel costs. Although travelling to distant locales may be tempting, it’s crucial to understand that proper budgeting and saving for a larger scale trip are fundamental to being able to afford expensive airfare. One way to save on your summer trip is to find a destination that not only resembles your standard of paradise, but is also closer to home than you would expect.

Key to knowing how to reduce credit card debt is being aware of your financial situation and any existing debt before you leave on vacation. Starting off in the red means that you will be in a more pressing predicament as soon as you arrive back at home. To avert any chance of financial instability, achieve a degree of financial freedom and establish a strong footing before you set off to relax.

Average Vacation Cost: Domestic vs International

A quick look at the average cost differences between domestic and international travel can help you make your vacation plans:

  • Transportation
    • International: $1,755
    • Domestic: $224
  • Lodging
    • International: $683
    • Domestic: $150
  • Food
    • International: $520
    • Domestic: $155
  • Entertainment
    • International: $293
    • Domestic: $52
  • Cost per day
    • International: $271
    • Domestic: $144
  • Total
    • International: $3,251
    • Domestic: $581

How To Know Whether You’re Mismanaging Your Credit Cards

There are strong indicators that reflect if you’re poorly handling your credit cards, and if any of them apply to you, it is probably wise to seek greater financial stability before planning your next vacation. The most outright sign is if you own more than a couple of active credit cards that are all accruing monthly interest. Given that many people reach their credit limit before paying off their debt in full, consider reevaluating your spending before applying for another credit card.

The most important thing to consider before you make excessive charges to your credit card is your interest rate. Using high interest rate cards that you can’t pay back immediately is a very dangerous practice. As a foolproof strategy for how to eliminate credit card debt, simply avoid high interest cards; however, if you already own one, be sure to pay the balance in full immediately.

Another warning sign of impending credit card trouble is when you only pay the minimum on your balance. While this may sound appealing, it puts you at a great disadvantage because the balance that remains unpaid gains interest. Essentially, your monthly bill will continue to expand while your credit score falls.

Recognize Your Vacation Spending Habits

Credit card debt rarely builds up simply because a person is unintelligent or low on funds. In fact, the majority of American credit card debt exists due to accidental money mismanagement. With a few simple adjustments to your vacation spending habits, however, you can learn how to reduce your credit card debt for good.

If you have a job that offers Paid Time Off (PTO), then this is the best way to significantly cut costs during your vacation. With some careful planning, you may break even upon arriving back at home, rather than facing a daunting amount of credit card debt.

By planning your vacations around federal holidays, you can capitalize on time while ensuring that you aren’t missing out on extra work hours. Likewise, taking unpaid time off of work can be a detrimental blow to your finances, since you would inherently be losing money rather than earning it during that time. Decrease your likelihood of falling into new debt by maximizing your PTO and taking very few additional days off.

Give the Kids a Vacation of Their Own

There are many advantages to sending the kids off for an activity of their own during the summer break. Whether you send them off to summer camp or to stay with their grandparents, they can enjoy their time away from home with a variety of new and exciting experiences. Simultaneously, you can relish the time away from the responsibilities of parenthood to enjoy your own hobbies and interests. Splitting up your vacation in this way can also help relieve costs.

You can make vacation budgeting a family learning moment by introducing monetary insights to your children and helping them to understand the importance of financial stability. If they’re old enough for the lesson, take the opportunity to teach your kids how to eliminate credit card debt by minimizing vacation costs, taking a shorter vacation, and reuniting at home for quality time.

Planning Ahead Welcomes Financial Freedom

Any financial advisor is likely to give similar feedback when asked how to most efficiently manage money: budget and plan ahead. Funding a summer vacation can be less stressful if you begin saving money in advance. Setting money aside each month can result in a decently sized fund that can take the financial burden off of vacationing. If you’re looking for how to eliminate credit card debt before you embark on a vacation, planning ahead and being prepared are critical to your financial health.

As you narrow down your vacation options, you can also make a cost spreadsheet. Determine how much you will need for travel, lodging, and food, among other miscellaneous costs. Visualizing your expenditures before spending money can help you decide whether or not the trip is worth the cost. If it isn’t, you’ll still have plenty of time to re-budget or explore more options.

Furthermore, searching for airfare deals before it’s time to purchase a flight is a surefire way to save money and help reduce debt. Since airlines typically offer promotional deals throughout the year, find out which destinations are being offered at a reduced rate during your projected vacation time. By planning around deals, you can free up your budget and enjoy financial stability during your vacation.

Budget with Financial Tools

There are many exciting ways to get a handle on your finances. Thanks to a wealth of new financial resources, you can easily plan your budget online. One way to effectively learn how to reduce credit card debt is to start with all of the numbers in front of you. Sometimes hidden costs and forgotten charges can wreck your budget, but by mastering your finances with budgeting software you can ensure that your bank account is kept in the positive with ease.

Develop a Sound Strategy

Whether you are planning to vacation this summer or not, your finances will greatly benefit if you know how to eliminate credit card debt. Prioritize paying off all accrued debt by starting with the balance with the highest interest rate. This will keep your debt minimal, as compounding interest rates can quickly double or triple the initial amount.

Depending on your creditor, research whether you can negotiate to lower your interest rate or receive an extension on your due date. This can not only help you to avoid hefty fees, but can contribute to a lesser monthly payment. Taking the initiative to negotiate may demonstrate to your creditor that you’re proactive about your debt and pragmatic about paying it off as soon as possible.

As you begin planning for this summer’s vacation, research your expected costs, create a reasonable budget, and aim to restructure any extraneous activities with cost-efficient alternatives. Proper money management will increase your peace of mind and allow you to more fully enjoy your vacation. For more information on how to reduce credit card debt, reach out to Budget Build Buy today.

How to reduce credit card debt over summer vacation

Newsletter Signup

Subscribe to our weekly newsletter for a daily dose of our best tips & wealth building financial tools.