A staggering revelation has emerged from recent data, showing that nearly half of all Americans who used a credit card on vacation last year are still paying off their debt. Real estate expert Michael Bordenaro highlighted this alarming trend in a recent video, where he delved into the financial implications of this widespread issue.
Vacation Debt: A Growing Concern
In his video, Bordenaro emphasized the troubling nature of this trend. According to a survey by WalletHub, 46% of people who financed their vacations with credit cards last year are still struggling to pay off that debt. This statistic is particularly concerning given the high interest rates currently associated with credit cards.
The High Cost of Credit
Bordenaro pointed out that the average interest rate on credit cards is now around 21.5%, up from 14.5% just a few years ago. He shared an example from one of his viewers, Shirley, who is being charged a staggering 35% interest rate on her Macy’s credit card. Such high rates make it extremely difficult for individuals to pay off their debts, leading to prolonged financial strain.
Responsible vs. Irresponsible Credit Use
Bordenaro highlighted a key distinction between two groups of credit card users. Approximately half of the users are responsible, using their credit cards for everyday purchases and paying off the balance each month. The other half, however, are accumulating significant debt and struggling to manage it. A recent Bankrate survey revealed that a significant portion of people carry credit card debt for years, with 17% having it for more than five years.
The Real Impact of Vacation Debt
The financial burden of vacation debt extends beyond just the interest payments. Bordenaro explained that at today’s interest rates, someone making only the minimum payments on the average credit card balance of $6,200 would take 18 years to pay it off and would end up paying $9,300 in interest. This situation is exacerbated by people continuing to accumulate more debt each year for vacations.
Bad Spending Habits
Bordenaro lamented the prevalence of what he termed “doom spending,” where individuals spend excessively on vacations despite their poor financial situation. He noted that many younger people, including Millennials and Gen Z, are particularly prone to this behavior, taking on an average of $4,000 in extra credit card debt for vacations.
Alternatives to Flying: A Costly Misconception
Many people believe that taking road trips instead of flying will save money. However, Bordenaro argued that this is not necessarily true given current gas prices and other travel-related expenses. He stressed the importance of thoroughly assessing costs before assuming that one option is cheaper than another.
The Bigger Picture: Inflation and Rising Costs
Bordenaro also discussed the broader economic context, noting that inflation continues to affect the cost of living. He cited data showing that 61% of Americans are spending more on groceries and dining out compared to a year ago. Rising costs for utilities and rent are also putting additional financial pressure on households, leading many to rely on credit cards to cover these expenses.
The Consequences of Ballooning Debt
The increase in credit card debt is evident from recent statistics. Bordenaro shared that total credit card debt in the U.S. has ballooned to nearly $1.2 trillion, with a significant portion of this debt becoming delinquent. This trend is expected to continue as people struggle with higher living costs.
The Government and Economic Policies
Bordenaro expressed skepticism about the government’s ability to effectively address these issues. He noted that despite efforts to stimulate the economy, the high cost of living and persistent inflation continue to undermine these initiatives. He warned that neither raising nor lowering interest rates would likely resolve the underlying economic challenges.
“Really Stupid”
People in the comments shared their thoughts: “There’s people who had lavish weddings, fast forward some years, they are divorced and STILL paying off the wedding. Don’t spend money foolishly folks. Get out of as much debt as possible, save money, invest.”
Another commenter added: “I work for a company that is affiliated with the airport. People come back from their elaborate vacations and when they go to use their credit card to pay their bill, DECLINED. Crazy.”
One person concluded: “People who take on debt to take a vacation are really stupid.”
A Call for Financial Responsibility
The insights from Bordenaro’s video paint a concerning picture of the financial health of many Americans. The prevalence of vacation debt and high interest rates highlight the need for greater financial responsibility and better planning. It is crucial for individuals to avoid accumulating unnecessary debt and to start saving, even small amounts, to improve their financial stability.
Financial Literacy
What are your thoughts? How can financial literacy programs be improved to help individuals make more informed decisions about using credit? What are effective strategies for managing and paying off credit card debt more quickly? How can government policies be adjusted to better address the root causes of high living costs and inflation?
To dive deeper into this topic, check out the full video on Michael Bordenaro’s YouTube channel here.
