Financing a $6,000 Disney trip on a credit card at today's 21% APR can balloon to $9,000 through compounding interest alone.
Nearly 50% of parents go into debt for Disney vacations, and a falling savings rate of 3.9% makes credit reliance even more likely.
Saving the full trip cost in a high-yield account before booking keeps the price at $6,000, with not a dollar more going to your card issuer.
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Bo Hanson, co-host of The Money Guy Show, put a number on something most families never see coming. Reacting to the finding that nearly 50% of parents go into debt to fund Disney vacations, spending an average of $6,000 on flights, park tickets, food, and hotels, Hanson said the sticker price is a lie: "Spending $6,000 for a Disney trip, but you actually put that on a credit card and you're paying punitive interest rates on that. That one trip that you thought only cost you $6,000, very likely could cost you $7,000, $8,000, $9,000 by the time that you get it paid off."
If you finance the trip and carry a balance, the memory outlasts the vacation by years, and the price tag you agreed to at booking is not the price tag you actually pay.
Financing a Disney trip on a credit card in this rate environment is one of the most expensive ways to buy a memory. The average credit card APR sits at roughly 21%, which the Federal Reserve itself classifies as record territory. Rates have hovered around 21% for the past year.
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At roughly 21% APR, a $6,000 balance paid off slowly over three or four years accrues interest on top of interest, ballooning toward $9,000. Every month the balance sits, close to 2% of what remains gets tacked on. Miss a payment, add late fees. Put next year's trip on the same card before the first is paid off, and compounding works against you. Hanson's $7,000, $8,000, $9,000 range is ordinary arithmetic for anyone who treats the minimum payment as the plan.
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