Holiday debt can be one form of a Christmas hangover
“And so this is the day after Christmas
And what have you done?
Spent all of your paycheck
And had too much fun.”
This slight rewrite of John Lennon’s “Happy Xmas” can be the lament of a lot of people when Dec. 26 rolls around. Maybe Christmas revelers had one too many cups of eggnog or sidestepped their diet for a week or two and are skittish about setting foot on the bathroom scale again.
A problem that can, however, last long after the tree is down and the gym membership is renewed is the debt hangover that Christmas generates for many consumers. In 2024, 36% of Americans took on additional debt during the holiday season, according to Lending Tree. The average amount of that debt was a little more than $1,100 per person, with most of that debt added to credit cards or taken on through installment loans. This year, Lending Tree reports the number of Americans accumulating debt is expected to go up 1% from last year and reach $1,200 per person.
Matt Schulz, the chief consumer finance analyst for Lending Tree, told CNBC that inflation and tariffs “keep straining household budgets, and that strain becomes especially clear during the holidays. Even sticking to the same shopping list as last year can cost more now.”
A discounted pair of jeans or a flat-screen TV that’s 50% off can seem like a wise purchase in the moment, especially amid the cheerful bustle of a store or during an online flash sale, but it can end up costing consumers more if they just add it onto a credit card that has a high interest rate, according to Joe Piszczor, a Washington-based financial advisor. Right now, the average credit card interest rate is about 24%.
“You want to make Christmas special,” Piszczor said, but it shouldn’t mean sacrificing long-term financial health, he added. “It’s a more difficult environment.”
Piszczor and other financial advisors said it’s important to set up a payoff schedule when it comes to holiday debt, or really any debt at any time of year. Having a cushion for emergencies like home or auto repairs is critical, he pointed out.
“Getting yourself to a good point with cash reserves is an important thing to do,” he said. “How do I get to three-to-six-months of your household budget of savings in the bank?”
Some consumers establish Christmas Club accounts that allow them to stash away money throughout the year to pay for gift-giving at the holidays, and some take advantage of post-Christmas sales at the end of December and beginning of January, and squirrel the goods away so they can be wrapped and shared when Christmas rolls around again.
The Consumer Financial Protection Bureau has a number of recommendations on how Christmas shoppers can avoid excessive debt. They include setting a budget, sticking to it and avoiding impulse buys; using cash when possible to resist the temptation to overspend; keeping an eye out for sales; tracking spending; and even considering giving gifts that are homemade.
Also, spreading cheer through experiences rather than goods can be a way to hold expenses in check, Piszczor said.
“I’ve seen people go for experiences rather than physical stuff, ” he said. “That’s more memorable.”