Over half (58%)1 of Brits pay for holidays on credit cards, almost one in four (22%) of these do so because they don't have the money to pay for their trip up front
1.15 million1 (8%) of these holidaymakers can only afford to make the minimum payment on their credit card each month. These sun seekers rack up a whopping £3.2 billion1 in interest over the 23 years it takes them to pay off their bill on average
A family of four would double the cost of their holiday to Florida (£4,637 on average) by making minimum repayments, taking the total cost to almost £11,000 and over 30 years to pay it off
Credit card spending on travel and hotels has rocketed by a third2 in the last five years from £24.9 to £32.9 billion. In total, holiday and hotel transactions on credit cards accounts for almost one-fifth (18%)3 of all spending
As sun tans fade and the UK's summer holiday season draws to a close, many will be left with hefty credit card bills to clear. New research1 from independent comparison website money.co.uk reveals more than half (58%) of Brits use their credit card to pay for holidays.
Whilst this can offer peace of mind with extra protection in the event of a tour operator collapsing, our research suggests up to 1.15 million (8%) people are doubling the cost of their holiday as they can only afford to make minimum repayments when they repay their credit card bill.
These 'minimum repayers' are racking up a whopping interest bill of over £3.2 billion on holidays alone. This could mean an all-inclusive week to Spain for a family of four could end up costing double (£7,855) and taking over 27 years to clear3
Average holiday cost for the top ten destinations for British holidaymakers
|Average cost of package holiday for family of four||Total interest paid||Total cost paid by making minimum repayments||Length of time to repay|
|£2,150||£2,809||£4,959||23 years 3 months|
Official data shows hotel and travel expenditure accounts for almost one fifth (18%)4 of total credit card transactions.
Credit card spending on travel and hotels has rocketed by a third2 in the last five years from £24.9 to £32.9 billion.
Almost one in ten (8%) make minimum repayments each month, more than doubling the original cost of their holiday and repaying the debt over an average of 23 years.
For many, the decision to book a holiday on a credit card isn't borne out of a lack of funds to pay - it's based on an appetite for security and protection. Whilst over half of people choose to pay for holidays on credit cards, 73% do so to get extra protection in the event of things going wrong.
A further 42% do it to protect them from tour operator failure. Almost one in four (22%) use credit cards to pay because they don't have the cash up front which could create the perfect storm for issues later on.
Paying for at least part of your holiday on a credit card can be a good idea as it gives you Section 75 protection - this is invaluable if something goes wrong. However, spreading the cost over many years without using a 0% deal is where the problems begin. There's no point doubling the cost of your break - think about how you'll fund your holiday before you book. In reality, if you're paying for a holiday on a credit and can only afford to make minimum repayments, you really should consider whether it's worth it.
Using a credit card for long term borrowing should be avoided unless it's on a 0% or low interest deal. With purchase rates averaging almost 20%, you'll pay the price for convenience and flexibility as the interest charges will quickly mount up. By using a standard rate credit card as a long term loan it creates a ticking time bomb of unmanageable debt, especially if you don't have a plan for paying it off. If you're carrying loaded credit cards, now is the time to take control and work out how to clear them or at least make them cheaper ASAP.Source: Hannah Maundrell, Editor in Chief at money.co.uk“
1. Research carried out on behalf of money.co.uk with OnePoll amongst 1,000 people who have been on holiday in the last year from 28th July 2016 until the 2nd August 2016
1.15 million is calculated by using
i. 77% of Britons took a holiday in 2015 (ABTA) = 39,102,829 (figure calculated using ONS population estimates mid-2015 18 years +)
ii. 60% of adult population are credit card holders (The UK Cards Association) 60% of 39,102,829 = 23,461,697. This calculation assumes that holiday takers are representative of UK 18+ population.
iii. 58.3% of our questionnaire respondents used a credit card to pay for a holiday 58.3% of 23,461, 697 = 13,678,169
iv. 8.4% of respondents who used credit card repaid their holiday using minimum repayments = 8.40% of 13,678,169 = 1,148,966
£3,227,446,055 billion in interest on holidays for those making minimum repayments
i. Based on the average amount of interest paid for a family holiday abroad in August if repaying on minimum repayments. Average holiday cost = £2,150. Average interest costs = £2,809. Average time to repay = 23 years.
ii. £2,809 x 1,148,966 = £3,227,446,055 billion in interest on holidays
2. The UK Cards Association: UK Card Expenditure Statistics - May 2016: Table 2D Hotels & Travel sector (value of purchase transactions)
3. Table 1 - average holiday cost for the top ten destinations for British holidaymakers
Top ten destinations source - ONS
Average holiday prices based on two adults and two children aged 5 and 8 travelling on 3 August staying in 3-4 star accommodation for 7 nights. This average is calculated by taking the lowest and highest holiday price for this search and taking the average of the two from Travelsupermarket.com
Minimum repayments calculations: UK Cards Association using APR 18.9% and minimum repayment at 2.5%
4. The UK Cards Association: Table 1 Card expenditure statistics (pg 8) and Table 2D Card expenditure statistics (pg 12)
Travel and hotel (value of credit purchase transactions 2015) = 32,933,000,000 as a % of all credit purchase transactions 2015 = 181,435,000,000.