Paying off debt instead of taking a vacation? Here's how to make the most of your summer
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Splurging on a summer vacation may not be on the horizon this year as many Americans struggle with job loss, debt and health problems due to the ongoing COVID-19 pandemic. States and countries are slowly opening to accommodate travel.
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The most current unemployment rate, for April, is 6.2%, according to the Bureau of Labor Statistics. On top of that, consumer debt hit a record $14.88 trillion in of 2020, up 6.2% from 2019, reports Experian.
While credit card balances declined, the rise in consumer debt as a whole shows the jarring transition Americans have become accustomed to during the COVID-19 pandemic. While paying off debt is always a smart decision, it doesn't mean you have to spend your summer sitting in a dark room watching Netflix. You might not get to enjoy the annual family trip to Disney or a couples' retreat to the Caribbean, but there are plenty of other ways to enjoy the season while paying down your debt and waiting for the pandemic to ease further.
Here are a few summer vacation alternatives -- as well as the best credit cards (low interest, no annual fee) -- for working toward a zero balance.
Explore your hometown with a 'staycation'
It might seem corny, but a staycation, or nearcation, is a fantastic way to enjoy summer on a shoestring budget. Nearcations are cheap, fun and devoid of jet lag (always a plus). With a little research, you might be surprised by the variety of exciting activities in your own backyard.
The key to a successful nearcation is trying something new. Be adventurous, creative and do some research to discover new restaurants, bars, neighborhoods and activities in your area. Put a few dates on your summer calendar and begin to plan a list of activities that would excite you on any vacation: spending time outdoors, visiting museums and relaxing.
If a hotel stay is in the budget, you might luck out with cheaper options in your hometown than you'd find in a more popular tourist area. For example, in my hometown of St. Louis, there are multiple dates this summer at the Hilton Downtown at the Arch that are under $200; some are even $99 per night. With the Hilton Honors discount, prices are as low as $94 a night.
Related: The best hotel credit cards of 2021
Visit with friends and family
If you can handle a few nights staying in your parents' spare bedroom or Aunt Deb's basement, a family visit can be a great way to explore a different city, spend time with loved ones and save money (just don't arrive on their doorstep without contacting them first, especially because of the risk of infecting them with COVID-19.) Maybe they will even make you some home-cooked meals.
In addition to spending quality time together, friends and family are often the best concierges, showing off their hometowns with recommendations on local restaurants and other hot spots. They might be able to point you to some fun, open attractions; locals always have the best info. Think of this as a great way to not only save money, but make your summer travel experience even more meaningful.
Related: What purposeful travel means to me
Complete a project around the house
Do-it-yourself summer projects can be enjoyable and rewarding (as long as you don't get in over your head). Maybe you've always wanted to create the perfect backyard retreat or remodel a bedroom. With how much time we have all spent indoors, making it appealing is a great way to spend quarantine days.
Summer is a great time to take inventory around the house to see if there are any affordable DIY projects that won't hinder your ability to pay down debt. Sites such as Pinterest provide (free) inspiration, and you won't have to worry about labor costs. Time spent planting that new garden is certainly more relaxing than fighting crowds during peak travel months.
Take a mini-vacation
One major problem when planning a summer vacation can be going overboard. It's extremely easy to get carried away. What often starts as just a week in Honolulu can quickly snowball into a week at a five-star resort, complete with lavish meals and pricey drinks. Instead, consider taking a mini-vacation. A national park is a great place to start, especially since many are open and littered all over the country. It also is a cost-effective type of vacationing, as camping won't take much out of your wallet.
The key here is to adhere to a strict budget and plan each aspect before the start of the trip. This includes having meals and activities mapped out before arriving at your destination. If you have a family, don't worry. You can do it, too.
Some ways to cut down on vacation expenses might include driving instead of flying (if cost effective); opting for a mid-tier hotel such as a Courtyard by Marriott instead of JW Marriott; and forgoing formal dining for cheap eats such as street food and food trucks.
And our favorite: Stop hoarding points and miles and USE them
This might be extremely difficult for those among us who hoard points. Many frequent travelers have racked up tens (even hundreds) of thousands in points and miles, but no matter how good a deal might be, many travelers can't seem to pull the trigger to book a flight or hotel. With airlines and hotels devaluing points and miles programs more often than not, it's important that you spend the points and miles you've earned. Rarely do the value of your points or miles increase in value.
If you are trying to pay down debt this summer, you might consider tapping into your frequent flyer and hotel rewards accounts instead of spending cash. As readers of TPG know (and even for you beginners out there), points and miles are extremely valuable and if used correctly, they can take care of the cost of your entire summer vacation. See TPG's latest valuations to ensure you're getting the most out of your points and miles this summer.
Credit cards for paying down debt
While we don't ever recommend carrying a balance on credit cards, if you find yourself in a situation in which you are unable to pay the full balance, it's best to have that balance on a credit card with little to no interest and no annual fee.
Furthermore, if you are looking to transfer balances from a credit card with a high interest rate, it's important to find a credit card with waived- or low-balance transfer fees. Here are the top credit cards for paying down debt.
Chase Freedom Flex and Chase Freedom Unlimited
The Chase Freedom Flex card and Chase Freedom Unlimited card are two solid no-annual-fee cards. Each card features a 15-month 0% introductory APR period on purchases and balance transfers. The variable interest rate following that 15-month introductory period is 17.24% - 25.99%.
Capital One SavorOne Cash Rewards Credit Card
The Capital One SavorOne Cash Rewards Credit Card has no annual fee and features a 15-month introductory period in which the APR is 0% on purchases and balance transfers (there's a 3% balance transfer fee). Following the introductory period, the card has an ongoing variable APR of 16.49% to 26.49%.
Related reading: The best no-annual-fee credit cards for 2020
Citi® Double Cash Card
The Citi® Double Cash Card offers 18 months of interest-free financing (0% intro APR) on balance transfers made within the first four months of account opening (then a variable APR of 16.24% - 26.24% applies). Balance transfers, however, will incur an introductory balance transfer fee of 3% of each transfer (minimum $5) on transfers completed within the first four months of account opening. After that, your fee will be 5% of each transfer (minimum $5) . Like all other cards featured on this list, the Citi Double Cash Card does not have an annual fee.
We can't stress this enough: TPG does not recommend that you ever carry a balance on credit cards. Even if carrying a balance means earning a lucrative sign-up bonus, it's important to pay your monthly credit card bill in full to maintain an excellent credit score.
If you are currently holding cards with high balances, summer is a great time to pay down these balances. Although this may mean forgoing a vacation, you will utter a sigh of relief once you've paid down your debt — especially come the holidays.
In addition to working to knocking off debt, there are numerous alternatives to a traditional pricey vacation. Opting for a staycation, following a strict budget on a smaller less-lavish vacation, or finally dipping into your points and miles are just a few of the ways to stay on track while having a little fun at the same time.
Related reading: The best apps for money management
Additional reporting by Max Prosperi.