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Debt lag: How to deal with debt after a holiday

Stuck with credit card or loan debt after a holiday? Here's how to deal with "debt lag".

Updated

Fact checked

Many Australians use credit cards or personal loans to pay for trips away. Whether it's just for part of the trip, like the accommodation or the flights, or the whole holiday, sometimes you just need a little bit of extra cash to fund your vacation.

But what happens when you return home and you have to repay your credit card or loan debt? 2019 research by credit bureau Experian revealed that three out of five Australians took between one month and two years to pay off their holiday credit card debt.

To make sure your holiday debt doesn't stay with you for years to come, we'll show you how to deal with your holiday debt lag.

Little girl sleeping on a tree on holiday

What is "debt lag"?

Debt lag is any debt that you've accrued while paying for a trip away. And while jet lag tends to go away after a few days, debt lag can really stick around, if you let it.

Debt lag can be money you charged to your credit card before you left, for things such as flights or pre-booked accommodation, or it could be a personal loan you took out to pay for things while you were away.

Why is debt lag so common?

Many people rely on products like credit cards and personal loans for travel and can go into debt even when they didn't plan to. Here's what is contributing to the debt lag problem:

  • Credit cards used for spending overseas

    Many credit cards offer overseas travel-spending features such as $0 foreign currency fees and $0 overseas ATM fees. Because of this, people tend to spend on their credit card, rather than their debit card while abroad. This ultimately can be dangerous, as it means people are not restricted by what they have available in their bank account, only by their credit limit. It's important to repay what you spend on your travel credit card as quickly as you can.

  • Personal loans for travel

    If you take out an unsecured personal loan for travel, you are spending money that you don't currently have. Unless you have a plan to repay it soon after your return, you could be repaying that debt over the next few years. This will limit your ability to save and take future trips within that period, unless you borrow more money, which ends up keeping you in a debt trap.

I have travel debt, what do I do?

If you've returned from a holiday with debt, there are a number of things you can do to repay it sooner. Here are some of your options:

  • Pay more than your minimum credit card repayments

    Credit cards have a minimum repayment amount that you're required to make each month, usually 2% of the total amount you owe. If you just make this minimum repayment, it will take you a long time to repay your debt. Pay as much as you can towards your credit card to reduce the amount of interest you're paying overall and t0 get the debt repaid as quickly as possible.

  • Make extra or lump sum repayments towards your personal loan

    Personal loans also have a minimum repayment amount, but unlike credit cards, this will ensure that your debt is repaid within the loan term. However, you can pay your loan off sooner than this if you make additional repayments towards your loan. Just make sure you won't be charged a penalty for doing so or for repaying your loan ahead of schedule.

  • Take out a debt consolidation personal loan

    If you have multiple debts or you are paying a high interest rate on your personal loan, you may want to consider a debt consolidation personal loan. This will allow you to transfer all of your debt to a new low interest loan so you can save on fees as well as interest. The key to a debt consolidation personal loan is to make sure the new loan is going to cost you less than what you are currently paying.

  • Use a balance transfer credit card

    If you have debts spread across multiple credit cards, consider applying for a balance transfer credit card. This will enable you to consolidate all of your credit card debts into one account and repay them at 0% p.a. interest for a certain period of time. Balance transfer credit cards work by letting you combine debts from multiple credit cards onto a new balance transfer credit card and then repaying that debt at 0% p.a. for a set period, usually between 6 and 24 months. Make sure you'll be able to repay the debt within this period of time as the revert rate on these cards can be quiet high, around 20% p.a.

How can you avoid debt lag (before you go away)?

The easiest way to avoid debt lag is to make sure it doesn't happen in the first place. Here are some ways to avoid going into debt over a holiday:

  • Book your trip well in advance and repay it before you go. If you're planning on relying on credit for your trip, then why not book further in advance? Work out how long you would need to repay the cost of your purchase and make your bookings that far in advance (you may even find better deals to reward your forward planning!). Then, when the time of your trip comes around, you'll be debt-free!
  • Consider layby travel options. There are many ways that you can "layby" travel. Companies let you select your travel option, put down a deposit and pay for it in full at a later date. This is a good option to consider if you can save up for the trip over time and will be able to repay it before you go.
  • Rely on travel debit cards rather than credit cards. Many travel debit and prepaid cards offer many similar features to travel credit cards, including no foreign currency fees and $0 ATM withdrawals. Some even let you earn reward points.

Compare your options to deal with debt lag

Data indicated here is updated regularly
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee
Plenti Fixed Rate Personal Loan

From 6.49% (fixed)
6.84%
$2,001
3 to 5 years
From $149 to $599
$0
You'll receive a fixed rate between 6.49% p.a. and 12.79% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 3 years. Interest and comparison rates calculated for a loan term of 5 years.
Plenti Variable Rate Personal Loan

From 6.49% (variable)
7.49%
$2,001
1 to 2 years
From $149 to $599
$0
You'll receive a variable rate from 6.49% p.a and 12.79% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 12 months. Benefit from transparent costs and a rate estimate before you apply.
Harmoney Unsecured Personal Loan

From 6.99% (fixed)
7.79%
$2,000
3 to 5 years
$575 ($275 for loans of below $5,000)
$0
You'll receive a fixed rate between 6.99% p.a. and 25.69% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 year terms.
Symple Loans Personal Loan

From 5.75% (variable)
6.47%
$5,000
1 to 7 years
from 0% to 5% of the loan amount
$10
You'll receive a personalised interest rate from 5.75% p.a. to 21.99% p.a. based on your risk profile
Borrow up to $50,000 to pay for what you need.
NAB Personal Loan Unsecured Fixed

From 9.99% (fixed)
10.88%
$5,000
1 to 7 years
$150
$10
You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
Wisr Personal Loan

From 7.95% (fixed)
8.78%
$5,000
3 to 5 years
$595 (Establishment Fee)
$0
You'll receive a fixed rate between 7.95% p.a. and 19.45% p.a. based on your risk profile
A loan from $5,000 that charges no fees for extra or early repayments. Keep in mind security is required in some cases.
Latitude Personal Loan (Unsecured)

From 7.99% (fixed)
9.24%
$3,000
1 to 7 years
$250 (Loans under $5000 - $140)
$13
You'll receive a fixed rate between 7.99% p.a. and 19.99% p.a. based on your risk profile
Apply for what you need from $3,000 and use it for a range of purposes. Repay weekly, fortnightly or monthly.
SocietyOne Unsecured Personal Loan (5 years)

From 7.99% (fixed)
7.99%
$5,000
5 years
from 0% to 5% (capped at $995)
$0
You'll receive a fixed rate between 7.99% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
SocietyOne Unsecured Personal Loan (2-3 years)

From 6.99% (fixed)
6.99%
$5,000
2 to 3 years
from 0% to 5% (capped at $995)
$0
You'll receive a fixed rate between 6.99% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
NOW FINANCE Personal Loans

From 6.95% (fixed)
8.57%
$5,000
18 months to 7 years
$495 (Based on $30,000)
$13
You'll receive a fixed rate between 6.95% p.a. and 17.95% p.a. based on your risk profile
Apply for loans from $5,000 and get a dedicated loan advisor. No security required.
CUA Unsecured Fixed Rate Personal Loan
9.89% (fixed)
10.14%
$5,000
1 to 7 years
$175
$0
You'll receive a fixed rate of 9.89% p.a.
An unsecured loan from $5,000 with flexible repayments and no monthly fee.
OurMoneyMarket Personal Loan

From 7.99% (fixed)
8.46%
$2,001
1 to 7 years
1.5–6% of your total loan amount
$0
You'll receive a fixed rate from 7.99% p.a. to 25.25% p.a. based on your risk profile
A personalised loan from $2,001 to $75,000 that varies based on your credit history and financial situation.
ING Personal Loan
Finder Award
ING Personal Loan
8.99% (fixed)
9.13%
$5,000
2 to 5 years
$100
$0
You'll receive a fixed rate of 8.99% p.a.
Benefit from no ongoing fees, no early repayment fees and flexible loan terms on amounts up to $30,000.
NAB Personal Loan Unsecured Variable Rate

From 9.99% (variable)
10.88%
$5,000
1 to 7 years
$150
$10
You'll receive a variable rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes. Benefit from fee-free additional repayments and a redraw facility. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
CUA Unsecured Variable Personal Loan
11.89% (variable)
12.15%
$5,000
1 to 7 years
$175
$0
You'll receive a variable rate of 11.89% p.a.
Borrow from $5,000 with the option for flexible repayments and no monthly fees.
MoneyMe Personal Loans

From 8.99% (fixed)
10.68%
$3,001
2 to 5 years
5 - 8% of the principal borrowed, capped at $1,200
$0
You'll receive an interest rate between 8.99% p.a. and 29.99% p.a. based on your risk profile
A flexible personal loan from MoneyMe with access to cash when you need it.
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Compare up to 4 providers

Data indicated here is updated regularly
$
% p.a.
Name Product Balance transfer rate Purchase rate Annual fee Amount saved
Skye Mastercard - Exclusive Offer
0% p.a. for 25 months
23.99% p.a.
$99
Finder Exclusive
Save with 0% p.a. on balance transfers for 25 months, up to 110 days interest-free on purchases and flexible instalment plan options.
ANZ Low Rate - Exclusive Offer
0% p.a. for 25 months with 1.5% balance transfer fee
12.49% p.a.
$0 annual fee for the first year ($58 p.a. thereafter)
Finder Exclusive
Save with 0% p.a. on balance transfers for 25 months (with a 1.5% BT fee) and $0 first year annual fee.
Citi Rewards Card - Balance Transfer Offer
0% p.a. for 30 months with 1.5% balance transfer fee
21.49% p.a.
$0 annual fee for the first year ($199 p.a. thereafter)
Save with 0% interest on balance transfers for the first 30 months (with a 1.5% BT fee) and a $0 annual fee for the first year.
Westpac Low Rate Card
0% p.a. for 20 months with 1% balance transfer fee
13.74% p.a.
$59
A low rate card offering 0% p.a. interest on balance transfers for the first 20 months and a $200 cashback offer.
St.George Vertigo Classic
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 13.99% p.a.
$0 annual fee for the first year ($55 p.a. thereafter)
Get 0% p.a. promotional purchase and balance transfer rates and save with a first-year annual fee waiver. Ends 30 Sept 2020.
HSBC Platinum Credit Card - Balance Transfer Offer
0% p.a. for 22 months
19.99% p.a.
$129
Enjoy a 22-month balance transfer offer, travel insurance and an annual fee refund when you spend an eligible $6k/year. Ends 30 Sept 2020.
Citi Clear Card
0.9% p.a. for 15 months
0.9% for 15 months, reverts to 14.99% p.a.
$99
Save with 0.9% p.a. for 15 months on purchases and balance transfers. Plus, complimentary purchase insurance cover.
NAB Low Rate Credit Card
0% p.a. for 20 months with 2% balance transfer fee
12.99% p.a.
$59
Receive an introductory 0% p.a. interest rate for 20 months on balance transfers, Visa Entertainment offers and a competitive $59 ongoing annual fee.
Citi Rewards Card - $500 Voucher Offer
0% p.a. for 12 months
21.49% p.a.
$99 annual fee for the first year ($199 p.a. thereafter)
Get a $500 e-voucher to spend at Myer, JB Hi-Fi or Coles when you spend $3,000 in the first 90 days. Plus, earn points with the Citi Rewards Program.
Bank of Melbourne Vertigo Classic
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 13.99% p.a.
$0 annual fee for the first year ($55 p.a. thereafter)
Save with 0% p.a. for 7 months on purchases, 0% p.a. interest for 22 months on balance transfers and a $0 first-year annual fee. Ends 30 Sept 2020.
St.George Vertigo Platinum
6.99% p.a. for 12 months
0% for 15 months, reverts to 12.99% p.a.
$49 annual fee for the first year ($99 p.a. thereafter)
Features an introductory 0% p.a. purchase rate, $49 first year annual fee and complimentary travel insurance covers. Ends 30 Sept 2020.
Coles No Annual Fee Mastercard
0% p.a. for 18 months with 1.5% balance transfer fee
19.99% p.a.
$0
Earn flybuys points for your spending and save with an ongoing $0 annual fee and 0% p.a. on balance transfers for 18 months.
Virgin Money No Annual Fee Credit Card
0% p.a. for 12 months
18.99% p.a.
$0
Offers 0% p.a. for 12 months on balance transfers and up to 55 days interest-free on purchases, all for a $0 annual fee. Ends 30 Sept 2020.
St.George Amplify Platinum
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 19.74% p.a.
$0 annual fee for the first year ($99 p.a. thereafter)
Save with 0% p.a. interest rates on purchases and balance transfers. Plus a $0 first-year annual fee. Ends 30 Sept 2020.
BankSA Vertigo
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 13.99% p.a.
$0 annual fee for the first year ($55 p.a. thereafter)
Enjoy a 0% p.a. for up to 22 months on balance transfers and up to 7 months on purchases. Plus, $0 first-year annual fee. Ends 30 Sept 2020.
St.George Rainbow Vertigo Platinum
6.99% p.a. for 12 months
0% for 15 months, reverts to 12.99% p.a.
$49 annual fee for the first year ($99 p.a. thereafter)
All the platinum features of the Vertigo Platinum Visa with a rainbow design in support of the LGBT community.
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Compare up to 4 providers

Mandy’s Mauritian debt lag

Mandy found a great holiday package to fly to Mauritius with her friend. She paid for her flights and hotel accommodation with her credit card – a total of $4,000 for eight nights. While she was over there, she spent a total of $2,000 on activities, food and shopping.

Mandy comes back home and realises that while she's tanned and relaxed, she has a bill of $6,000 on her credit card. Later on, she finds that a hefty sum of money has gone towards the foreign transaction fees and international ATM withdrawal fees she was charged, making her part of the 29% of Australians who come home after a trip to credit card shock.

Mandy budgets to pay off her trip within six months. By the time her debt is paid off, her total interest bill is $313.53.

Let's look at how much interest would be charged on different balances over different periods of time:

Credit card debt3-month repayment period6-month repayment period12-month repayment period
$1,000$29.64$52.25$98.45
$2,000$59.29$104.51$196.89
$5,000$148.22$261.27$492.24
$10,000$296.44$522.55$984.47
Source: Credit Card Finder, calculations using average credit card interest rate of 17.7% p.a.

Avoid debt lag in future with a staycation

If you're looking for ways to avoid debt lag in the future, you may want to consider a staycation. There are numerous reasons that a staycation can be as worthwhile as a vacation abroad. You can still relax, take time off work, look into what tourist attractions are in your area, pack a day bag and go out exploring. You may find some gems that you didn't even know about, right on your doorstep.

Taking a staycation can save you money on travel, accommodation and expensive trips out. And, you can still treat yourself to a cheeky shopping trip or a bottle of bubbly, while also saving yourself thousands.

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Important Information*
Logo for Harmoney Unsecured Personal Loan
Harmoney Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 25.69% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.

Logo for NAB Personal Loan Unsecured Fixed
NAB Personal Loan Unsecured Fixed

You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.

Logo for SocietyOne Unsecured Personal Loan
SocietyOne Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.

Logo for Pepper Money Unsecured Fixed Rate Personal Loan
Pepper Money Unsecured Fixed Rate Personal Loan

You'll receive a fixed rate between 6.95% p.a. and 17.95% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Make additional repayments or pay off the loan early, penalty-free.

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