Going in debt for a trip: "Was that really the right call?"

While there’s no place like home, since the pandemic people are traveling like there’s no tomorrow. Wanderlust is all but an addiction, and travelers are hitting the road whether it’s good for their bank account or not.

Forty seven percent of participants in a recent survey from Allianz Travel Insurance said they couldn’t really afford a vacation this year but nearly half of them said they were likely to take one regardless. Similarly, in a Forbes Advisor survey, 30% of parents and 23% of non-parents polled said they were willing to go into debt to fund their travel. 

The trend of vacationing now and paying later has a new phase — “justi-vacation.” You “justify” taking a vacation that you can’t afford for any number of reasons, like telling yourself you deserve it, or that it’s a bucket list trip.

There’s something to be said for living in the moment and seizing the day, but is it worth putting $5,000 to $10,000 or more on a credit card to travel? 

"Why not just go for it?"

Eli Itzhaki promised his wife they would finally take a break after all the years of grinding with their business Keyzoo Locksmiths. “Next thing I knew, I was staring at travel sites, booking tickets and borrowing around $10,000 to make it happen. It wasn’t exactly the smartest financial decision I’ve ever made, but I figured, why not just go for it?”

Last year they went to Indonesia, Singapore, Malaysia and China. They spent time at beaches in Bali, got lost in the temples of Yogyakarta, shifted gears to the modern mecca of Singapore and in Malaysia had a bit of both worlds — the buzzing city life in Kuala Lumpur and the peaceful side of Cameron Highlands. As for China, he said, “It was like living inside a history book and a sci-fi movie at the same time. Shanghai’s skyscrapers one day and exploring ancient Xi’an the next.”

However, “The debt felt heavy once the vacation buzz wore off," he said. 

"It’s not like business is always predictable, so there were moments where I felt the pressure. It’s one thing to take a trip and make memories, but another to realize you’ve got a chunk of money to pay back while still juggling everything else. Had a few sleepless nights thinking, was that really the right call?”

He doesn’t regret the trip, but at times wished he had waited, saved more and taken a less expensive trip. “It took a while to bounce back from that hit to the wallet — no extras, no fancy dinners out, cutting back where we could,” he said. But at the same time, those memories — snorkeling in Bali, walking through Chinatown in Singapore, standing on the Great Wall in China — stick with him. “It’s not just the places; it’s how we got closer, the stuff we laughed about, the random mish that turn into inside jokes later.”

He says financing the trip was not ideal. “But in terms of living a little and keeping a promise, yeah, I think it had its own value. Would I do it the same way again? Probably not. But I wouldn’t trade the memories either, even if they came with a price tag.”

Jeff Powell and his wife took four trips this year: to Hawaii Volcanoes National Park, Haleakala National Park, the Great Smoky Mountains National Park and Mammoth Cave National Park. They hiked, explored, ascended volcanoes, descended into caves and chased waterfalls and bears.

While they used frequent flyer points to help pay for flights, they spent more than expected and put close to $5,000 on a credit card. Consequently, they canceled plans to go to Canada next year. They are eating out less and spending less on gifts and impulse buys.

Despite the pinch, he said, “The memories my wife and I created are worth much more to me than the cost. Traveling together, exploring new places and spending time outdoors are all investments in our health and the health of our marriage. Nothing is more important to me than that.”

What do experts think?

Alex Langan, chief investment officer at Langan Financial Group, said, “I strongly advise against going into significant debt for a trip, even if it’s a bucket list experience. Travel is an important and rewarding part of life, but taking on thousands of dollars in debt, especially high-interest credit card debt, can set you back financially for years.”

He said the better move is to save for the trip. “This way, you can enjoy the experience without the financial stress of repayments, and you won't jeopardize other important financial goals like saving for retirement or maintaining an emergency fund.”

Furthermore, be mindful not to max out your credit limits to take a trip. “Not only can this hurt your credit score, but it may leave you with no cushion should an emergency come up while traveling,” said Richard Barrington, a financial analyst for Credit Sesame.

He added, “Never borrow before figuring out how payments on that debt fit into your budget. This can give you valuable perspective on whether the debt is worth it. After all, if a two-week trip leaves you with years of financial stress, it hardly seems worthwhile.”

The only time travel debt makes sense is for once-in-a-lifetime events with fixed dates, such as a destination wedding or a trip to see a sick relative, said Kevin Shahnazari, founder and CEO of FinlyWealth. But even with those caveats, he said the debt shouldn’t exceed three months of disposable income. 

If you use debt, use discipline and consider your overall financial health. Assess your current finances and any emergency funds, and determine whether your debts are under control and manageable.

“If not, adding more debt could put undue strain on your finances,” said personal finance coach Michael Ryan of Michael Ryan Money. But if you have those things in place, a splurge may be OK.

“If the experience is truly a once-in-a-lifetime opportunity that aligns with your values and personal growth, the emotional and experiential benefits may outweigh the financial costs," Ryan said.