MarketWatch found that 75 percent of Americans have, at least once, put their vacation on their credit card. They also found that Americans were more interested, on average, in saving for a vacation than saving for retirement or a home. The average vacation cost was over $1,1,00. The majority of the respondents to the survey do not budget for a vacation.

Colony Associates is often asked by customers if they should use their credit cards to fund their next vacation. The answer is that it is great to use your credit card for your vacation if you can pay the entire balance at the end of the month. Otherwise, it is a bad idea.

What is Wrong With Credit Card Usage?

High Interest: Credit cards can be a great way to track your spending, if you pay off the balance in full each month. The problem is that many Americans are stuck in what they believe is an endless debt loop. They cannot pay off their credit cards because the average interest rate on consumer credit cards is over 20 percent.

Over-Extended Credit: MarketWatch also warns that consumers who carry high credit card balances can also harm their ability to get other credit they need at beneficial interest rates, such as mortgages. Also, borrowers who are over-extended in their credit may not get their application for an apartment approved.

Banks and other lenders look at a borrower’s credit utilization ratio as one important factor in credit worthiness. If a borrower utilizes too high of a percentage of the total credit lines they have been extended, they are considered not a good credit risk. This leads to borrowers either being turned down for loans or having to accept high interest rates.

Over-Estimation of Travel Rewards: A study conducted by Nerdwallet found that many Americans overestimate the travel rewards they will receive from their credit cards. Many people also do not take into account the interest they are paying and weigh that against the benefit of the travel reward. They warn consumers not to get into high-interest credit card debt in order to earn travel rewards.

Other Solutions

Save Automatically for Your Vacation

There are so many great consumer debit cards out there that allow you to place some money from your paycheck into your account automatically each month. One of the better products is American Express Bluebird. It is a debit card that allows you to automatically deposit your paycheck each month into it, just like a bank account. A savvy consumer can choose the best of these debit cards and use them to automatically sock away money for vacations, rainy day expenses, annual bills, etc.

If You Are Already Over-Extended

If you already have indulged in vacations that dug you into a debt hole, you need to take the time to create a budget and see where you can reduce expenses in order to start paying down the debt. Also, you need to reduce your interest payments.

There are two good ways to reduce interest payments on your debt:

Zero-Interest Credit Cards: If you have good to moderate credit, you can get a credit card that will provide you an interest rate of zero percent for 12 to 18 months. This is a good option if you can pay down the debt during that introductory, interest-free period.

Personal Loans: If it will take over a year or so to pay down your current, high-interest credit card debt, you can take out a personal loan from a company like Colony Associates. These loans tend to have low interest rates and longer payment periods. They allow you to make one monthly payment on all of your debt and provide a definite debt payoff date.

Colony Associates advises consumers to have a budget for vacations, just like any other yearly expense. If you are already struggling in high-interest credit card debt, call them today for solutions