It will be a long winter for millions of Americans who won’t be able to head to a sunny place for a vacation.
WalletHub says 33 million Americans, many of them Millennials, are tapped out and will stay home this winter, according to a new survey.
“It should be no surprise that 33 million Americans say they can’t afford to travel this winter. Even though unemployment is near record lows and the stock market is near record highs, there are a lot of things weighing on consumers financially right now,” according to WalletHub CEO Odysseas Papadimitriou.
He says many cardholders are “racking up credit card debt at a pace reminiscent of the run-up to the Great Recession.” That’s when millions of cardholders, many suddenly unemployed, couldn’t pay card bills.
Papadimitriou adds that “student debt clearly is a problem.”
Indeed, some hoping to travel this holiday season are still paying last year’s debts, according to another study by NerdWallet.
“One in twelve Americans who put 2018 holiday travel expenses on a credit card are still paying for them,” says Kimberly Palmer, a personal finance expert with NerdWallet.
“Nearly two thirds who spent money on flights/hotels during the 2018 holiday season spent more than they planned to, with some taking cash from their savings or using their credit card to cover the additional costs,” she adds.
You Like Debt?
Part of the problem, according to NerdWallet, is about 40 percent of Americans “would rather go into debt paying for holiday travel than skip seeing their family for the holidays.”
The report found that the average holiday expenses on flights and hotels come to $1,105 put on a credit card.
A Long Island advisor says many of the problems of excessive debt are the result of “a lack of awareness of credit card debt.”
Charles Hughes, an advisor in Bayshore, New York, says cardholders, especially younger ones, need to “understand how destructive credit card interest is and how it will hurt them achieving long term goals.”
The Generations Split in America
An academic notes there is a generation gap in how different groups use credit cards.
Amanda Templeton, a business professor at Southern Utah University, notes the income difference between generations. She says this is why many Millennials won’t be able to travel this holiday season. But if they do, they will often do so by adding debt.
Baby boomers tend to pay for trips with cash while Millennials often use credit cards to finance trips, according to Templeton.
Millennials, she adds, are “more apt to treat themselves.”
Don’t Forget Revolving Versus Transacting
Before Millennials or anyone else treat themselves they should remember the commonsense spending rule of thumb that GregoryBresiger.com will preach until hell freezes over: Be a transactor. Never be a revolver.
Transactors pay off credit card bills each month and never pay interest, saving a small fortune over the course of decades of credit card use.
Revolvers pay tons of interest charges, along with higher charges in interest rates because they have poor credit ratings.
Transactors can afford to take winter vacations. Revolvers take vacations and dig themselves into deep credit card holes that they may never escape.
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