Travel and Credit Card Debt

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To tell you the truth, I wasn’t going to blog today. I spent a couple of days in Atlantic City with my family, helping the local economy to recover from those devastating blows that the sudden influx of competition in the neighboring states has inflicted on this once thriving municipality.

And then I had to get some writing done because my blog and my clients wait for no man. Simply put, I’m suffering from sleep deprivation.

So, when I got back home I was beat, but I still opened my twitter before going to bed and then I read this:

Yawn. Come on, everyone knows the answer to this question. I clicked on the link mechanically and then…

Just like that, it’s gone. It=Sleepiness.

Please forgive me this cheap Usual Suspects reference. Totally lame, I know.

Apparently, Deja believes that debt is OK. But only when it’s safe. And only when you are 100% sure that you can repay it. In other words, you have to be confident. And then it’s fine. Just go for it!

I feel like I shouldn’t be saying this, but I do think it’s possible to get into debt to travel the world and still call yourself a responsible adult. (I admit that it can be a slippery slope, though.) 

I agree: you shouldn’t be saying this. You are a freelance writer with a degree in finance. You are supposed to know better.

In order to illustrate her point, Deja tells us a story from her own experience.

The only time we ever got into debt to travel was when we were in a long-distance relationship. Cheesy [DH or boyfriend from what I understand] had the money upfront for the airfare to visit me and he was staying at my place, so accommodation was sorted. He also had some cash, but he still maxed out his credit card during the trip.

Is it just me, or does this example have nothing to do with travel? Maxing out on a credit card is not a good thing, but as long as this is for love–understandable! But again: what does this argument have to do with travel? Nothing. Nothing at all!

But that doesn’t preclude the author from making a bold statement. I mean, literally bold!

How to responsibly get into debt to travel the world

I don’t know. Do tell.

I think one of the best things about being an adult is having the freedom to bend the rules. You know you’re supposed to do A, but you decide you’ll do B instead and it’ll be okay because you know what you’re doing. The challenge is to make sure you really do know what you’re doing; you have to be 100% confident that the risk you take won’t land you in a bigger trouble than you can handle.

Bending the rules? Oh brother, she’s talking my language now! Isn’t it what we always do in this hobby? Hey, you know you’re not supposed to sign up for 10 Citi Executive cards and get 10 bonuses, do you? But wait! What’s that 100% again?

Ah, bummer! She is not talking about hacking. She is talking about debt. Apparently, you are supposed to be 100% confident that getting into debt won’t land you in hot waters. And then–you’re good to go!

But don’t you dare to say that she hasn’t warned you. Because she spells out exactly what getting into debt means.

When it comes to getting into debt, the most important thing is to understand the implications of that debt. Simply put:

  • You’ll have to pay interest on that debt.
  • It will take you some time to pay off that debt.

Once you understand what getting into debt entails, it’s up to you to decide whether the risks and rewards are acceptable.

Thank you so much for pointing it to my attention. Because now that I know what borrowing money with interest really means, I can safely and confidently get a credit card loan for a week in the Maldives. That’s a go-time, baby!

To further illustrate her point, Deja brings us another “real-life” example.

When you get into debt to travel, you’re essentially saying that you’re willing to pay more for the privilege of traveling now rather than at some other time in the future. For example, the trip may cost $2,000, but because you pay for it with a credit card and you don’t pay off the balance immediately, it ends up costing you $2,500.

So, not only it’s OK to borrow money from a credit card to travel the world, but it’s also OK to borrow money from a card that charges 25% interest (provided you are going to pay it off within a 12-month period). Although I did give Deja a benefit of a doubt in my comment on her post. Perhaps she wasn’t thinking about the number and it was just an unfortunate slip. Seriously, people who use a 25% APR credit card and don’t pay it off every month religiously, should have their Credit Card License removed for good. No appeals and no second chances!

OK, enough sarcasm. What have we learned from this enlightening piece?

  • That even after all the devastating heartaches, defaults, bankruptcies, and foreclosures of the preceding roller-coaster decade, the whole “live now, pay later” attitude is alive and well.
  • That many people would still rather throw money (borrowed money, mind you) at the problem than use their brains and live a good life without devastating their finances and their future.

A really funny thing is: Deja knows about credit card bonuses, miles, and points. When someone who knows about these incredible opportunities advocates borrowing from credit cards–it’s a double whammy.

You know what’s even funnier: push comes to shove–you don’t need this anyway. None of it! All you would need to do is to apply for one of many zero-percent-intro-APR-for-12-15-18-months-credit-cards and avoid paying interest entirely. But I guess, that would be an interest-free loan and it would render Deja’s post on getting into debt obsolete.

This way, if you borrow $2,000, all you’d have to pay back is the same $2,000. You would have to charge your entire travel to this credit card, put it in a sock, pay it off during the intro period, and never touch it again until your debt is gone. Even then, I don’t recommend doing it if you are less than 100% sure and confident, because guess what:

This 0%-introductory period is a trap. The odds are stacked against you. The odds are, you won’t be able to pay it off entirely, and then, the high double digit APR kicks in, and it’s a gotcha time! We all believe that we will be better off tomorrow than today, because how can we not be–we are special! I will totally nail that promotion, or get an inheritance, or pick a winning number, or hit a jackpot. Totally! And then the world is my oyster. And don’t you dare clip my wings, party-pooper!

Well, I’d rather be a party-pooper than a dreamy-eyed proponent of credit card debt.

We are talking about how to responsibly use debt here.

No, “we” are not. There is no such thing as “responsible” use of credit card debt! The words “responsible” and “credit card debt” should not be used in the same sentence. They should not be used in the same paragraph. They should not be used on the same page.

You are walking a dangerous line. To those who have the income to support their lifestyle, credit card debt is unnecessary and incredibly wasteful. For those with lower income, borrowing from credit cards to travel the world is nothing short of pure madness.

Pay those suckers off every month boys and girls, or stay home. It’s that simple!

And once again, there are other ways to travel the world. For free! And we all know what they are (up to the left 🙂 ).

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5 Responses to Travel and Credit Card Debt

  1. Wow. Never ceases to amaze me what bloggers blog about…Yikes! Nice take down, I can’t top this 🙂

  2. Hi Andy, saw some clicks from this link and thought I should check out what you have to say on top of the comment you’ve already left on my blog. I wrote a long reply to your comment that I hope answers your concerns.

    I just have one thing to add. “Dangerous” and “safe” exist on a spectrum. Some really conservative people would say that travel hacking is dangerous — and it kinda is, if you compare it with normal use of credit cards that doesn’t involve getting many cards and churning — but it doesn’t have to be. Whether something is “dangerous” or not is highly personal.

    You think it’s understandable that we used credit card debt to meet up during a long-distance relationship, which means that you agree it’s possible to use credit card debt in a way that is acceptable. I think it makes sense to extend the same courtesy to other people to decide for themselves whether getting into debt is acceptable in their situations.

    • Andy Shuman says:

      Deja, thanks for your comment.

      I’ll admit, I might be the wrong person to reckon with because I hate credit card debt on principle. Like most people, I’ve been through credit card debt, and it was no fun. Almost half of the US households carry a balance habitually and often recklessly, putting a time-bomb under their future. Unfortunately, most people are just one catastrophic event away from delinquency.

      You have a valid point when you say that travel hacking can be dangerous too. That’s why some people including me try to teach folks how to do it right. You can’t just start hacking away out of blue. You have to learn the ropes.

      Using credit cards in general, on the other hand, has a very low entry barrier. Anyone who hasn’t screwed up (yet) can run a debt. And while regulation agencies and new disclosure laws make it harder for credit card companies to hide the fine print, many people, unfortunately, will use any excuse to convince themselves that they need to “live” NOW. This is why I reacted to your post the way I did.

      The way you describe your long-distance relationship is not really getting into debt. Repaying your charges in a couple of months doesn’t qualify (fortunately) as debt. You ended up paying perhaps $20-40 in interest, which is not a big deal. But when you say that getting into debt to buy travel might be OK–in my mind you’re advocating something completely different. Not paying off in a couple of months, but carrying a balance for some period of time in order to pay for a leisure activity. That’s a huge no-no in my book.

      I would like to refer you to an excellent article posted by a veteran loyalty program blogger Ric Garrido (I’m sure, you’ve heard of him) called Airheads in the Credit Card Rewards Bubble Please read his sobering personal account (keep in mind that he is one guy who knows a thing or two about credit cards) and see if that doesn’t give you a pause about the whole idea of getting into credit card debt in order to buy travel. Thanks again for your comment.

      • I see where you’re coming from now. I wasn’t sure initially why you reacted so strongly to my post because we actually agree on this issue: using credit card to travel is bad, but there are times when it may be acceptable.

        As you mentioned, the problem may be that we define “debt” and “travel” differently. I use these terms broadly, whereas you define “debt” as carrying a sizeable balance for a prolonged period of time and “travel” strictly as a leisure activity. This is why you found my example of a visit during a long-distance relationship and a quick balance payoff as odd. But that is exactly the kind of “debt” and “travel” that I mean in this post — travel with a purpose and responsible use of credit cards.

        Please note that I pepper my post with calls to think and rethink the implications of using credit cards to travel, eg. consider why you need to go now instead of later, calculate how long it’ll take to pay off the debt and how much the interest will be, etc. I also wrote that those with an existing debt problem shouldn’t do it and that the balance should be paid off ASAP. It really wasn’t meant to encourage the kind of “debt” and “travel” as you define them.

        • Andy Shuman says:

          Hi again Deja.

          Well then, we’re on the same page. 🙂 My only concern is that some of your readers might misinterpret your message just the way I did. You know how people like to hear endorsements about something they really want to do. Even when they know deep down that what they want to do is wrong.

          I wish you the best of luck and don’t be a stranger.

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