38% of Americans Say They'll Take on Debt to Travel and Eat Out
KEY POINTS
- Many younger Americans are comfortable with going into debt for discretionary expenses.
- Some are pessimistic about saving for long-term financial goals.
- Cutting back on expenses and using a balance transfer card could help eliminate credit card debt.
I spend a lot of time working from my laptop at coffee shops and I overhear plenty of conversations about people's upcoming travel plans. I've always been amazed at how frequently some people travel across the country and even overseas, and I have to admit, I've wondered how so many people can afford their travel itineraries.
According to a recent Bankrate survey, they might not be able to afford it as easily as it seems. A whopping 38% of Americans say they'd be willing to go into debt to travel, eat out, or attend live events.
Here's why Americans are willing to take on more debt and how to pay it off if you've accumulated too much.
Some Americans are spending like there's no tomorrow
Americans' credit debt has increased lately and is now $1.12 trillion -- up 13% from a year ago.
That's bad news, especially when you consider that credit cards have an average annual percentage rate (APR) of 22.63% for accounts assessed interest.
Younger Americans may be more willing to take on credit card debt because some of them have developed a more pessimistic view of the economy. A recent Intuit survey found that 2 in 3 Gen Z Americans say they'll never have enough money for retirement, and 75% of them say the current economy makes them hesitant to set long-term financial goals.
Unfortunately, that thinking can be self-defeating. Thankfully, there are some proven ways to help improve your financial situation if you've racked up credit card debt.
How to get out of debt
There are several excellent strategies to eliminate your credit card debt. You may only need one, or a combination of the following to improve your situation.
1. Find out where your money is going
Budgeting gets a bad rap because spending time mapping out your monthly expenses is, well, boring. Instead of thinking about your finances like an accounting task, focus on finding a few expenses to cut out.
For example, every few months I look at my monthly subscriptions and usually find a video streaming service I forgot I signed up for so I could watch one show!
I use a budgeting app to easily track my expenses and remove unnecessary subscriptions once I catch them.
2. Tackle your debt with aggressive payments
I recently paid off my credit card debt by working on a side project for a few weeks. I spent long hours on it, but the extra cash allowed me to eliminate my debt and have a little left over.
One of the most common ways to tackle debt is to use the debt snowball method. With this system, you pay off your smallest balance first, then apply the payment you made on your previous balance to the next highest amount.
For example, let's assume you have two credit card balances: one is $1,000 (with monthly payments of $150), and the other is $3,000. With the debt snowball method, you'd spend $150 a month to eliminate the $1,000 balance first.
Once you pay off the first card, you eliminate the next card by putting $150 toward the second card each month, in addition to the minimum monthly payment.
3. Apply for a 0% balance transfer card
It may seem counterintuitive to apply for a new credit card when trying to pay off your debt, but this can be a good option because credit card rates are so high right now.
Many balance transfer cards give you a 0% interest rate for 15 to 21 months, allowing you to make payments toward your balance without incurring interest.
For example, if you have a credit card balance of $3,000, an interest rate of 21.5%, and pay $150 towards the balance each month, it will take 25 months to pay off and cost you $724.82 in interest.
In contrast, if you make the same monthly payments on a $3,000 balance with a 0% interest rate, it will take just 20 months to pay off and cost you $0 in interest. Just keep in mind that most cards charge a one-time transfer fee of between 2% and 5% of the balance.
Credit cards tempt us all, so don't feel bad if you've gone into debt. But it's essential to stop using them -- especially for travel, eating out, and entertainment -- if you can't pay the balance off each month. Once you stop using your cards, use one or a few of the suggestions above to tackle your debt head-on.
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