The escalating cost of living is pushing more Australians into financial turmoil. The latest research from Compare the Market reveals that one in five Aussies will fund their next holiday using credit cards, personal loans, or Buy Now Pay Later (BNPL) schemes. The findings highlight a troubling trend as many travellers risk accruing substantial debt in their quest for a well-deserved break.
The Debt-Lag Dilemma
Fear of missing out on vacations during these financially challenging times drives Australians into what experts call “debt-lag.” Compare the Market’s comprehensive survey, involving over 1,000 Australians aged 18 and over, uncovered that 19.1% plan to utilize credit options to finance their holidays. While these payment methods offer the convenience of immediate booking, they come with significant financial repercussions upon return.
David Koch, Economic Director at Compare the Market, urges Australians to carefully consider their financial options before plunging into debt for a holiday. “Enjoying life and taking a well-earned holiday is important, but it’s crucial to be financially responsible. Always choose holidays that fit within your budget,” Koch advises.
The Hidden Costs of Holiday Debt
The financial ramifications of holiday debt are stark. Compare the Market’s analysis shows that financing a $5,000 holiday on a credit card with a 20% interest rate could take up to 49 years to repay if only minimum payments are made. This means a single holiday could cost over $20,000 in interest alone.
“Sometimes, simpler vacations, like family camping trips or exploring local destinations, can create more cherished memories than expensive trips to Disneyland or Universal Studios,” Koch reflects. “Our most memorable family holidays were the stress-free ones we had here in Australia.”
Generational Insights on Travel Financing
Contrary to the stereotype of Gen Z as the generation of instant gratification, they are the least likely to rely on credit cards, personal loans, or BNPL schemes for their holidays. Instead, they prefer to save up and pay in full when booking. The survey reveals that 70.7% of Gen Z holidaymakers pay for their vacations upfront, compared to only 58.4% of Gen X travellers, who are the most likely to use credit options.
| Payment Method for Next Holiday | % of Gen Z Holidaymakers | % of Millennial Holidaymakers | % of Gen X Holidaymakers | % of Baby Boomer Holidaymakers |
|---|---|---|---|---|
| Save all the money in advance and pay in full at the time of booking | 70.7% | 64.4% | 58.4% | 57.3% |
| Use a credit card, personal loan, or Buy Now Pay Later scheme to pay for it | 11.4% | 19.7% | 21.3% | 21.1% |
Despite the financial strain, 14.2% of surveyed individuals don’t have a holiday planned. Given the current economic climate, Koch suggests that this might be a sensible approach. “We’re experiencing a cost-of-living crisis that requires more than just small budget adjustments; it demands a rethinking of our overall lifestyle,” he notes.
A Shift in Holiday Planning
The days of annual international family vacations are becoming a thing of the past for many Australians. Koch points out that frequent international travel is relatively new and that, historically, families did not plan extravagant getaways every year. “In many ways, we might be returning to a more sustainable norm,” he says.
“A good holiday doesn’t have to leave you thousands of dollars in debt. It’s about relaxing, regrouping, and spending quality time with loved ones.”
Top Budget Holiday Tips from David Koch
- Stay Local: Opt for domestic holidays to avoid jet lag and potential debt lag. Australia boasts numerous hidden gems waiting to be discovered.
- Hunt for Deals Online: Use comparison sites like Skyscanner, Webjet, and Google Flights to find cheap fares and accommodations. Websites like Booking.com, Trivago, and Airbnb offer budget-friendly lodging options.
- Always Get Travel Insurance: Protect yourself from financial losses due to cancellations, theft, or medical emergencies by securing travel insurance before your trip.
As Australians navigate the challenges of the cost of living crisis, mindful holiday planning and financial prudence can help ensure that vacations remain a source of joy rather than a financial burden.
For more insights and expert advice, visit Compare the Market.
Written by: Michelle Warner
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