Ghost of Christmas past: Many consumers still paying off holiday debt
Nearly one in five respondents said they regret how much they spent over the holiday season -- but 7 percent wish they had spent more.
Although spring has arrived, many consumers are reminded of the holiday season every time they open their credit card statements.
Americans spent an average of $1,131 during the holidays in 2021, according to a recent survey by MoneyGeek. As of last month, four in 10 of them still were paying for their generosity.
On average, consumers charged 65 percent of their holiday spending. More than four in 10 put more than half of their holiday expenses on their credit cards, and one-third charged all of their expenses. People with exceptional credit put the largest percentage of their spending on credit cards.
Among the other findings:
Still paying. Survey respondents between the ages of 35 and 54 had the highest level of unpaid debt at 48 percent. Only 17 percent of those with exceptional credit had not paid off their holiday debt by February. The average respondent carried a credit card balance for four months of the year.
Excluding people who paid off their cards every month, respondents typically carried a balance for seven months of the year. One-fifth of them carry a balance every month.
Holiday hangover. Nearly one in five respondents said they regret how much they spent over the holiday season, although 7 percent wish they had spent more. Women were 35 percent more likely than men to regret overspending, while people aged 25 to 44 had the most spending regret in general.
Seasonal trends. Seasonal spending tends to peak in November and December. As a result, credit card debt typically rises steadily at the end of the year and then gradually decreases through March as consumers pay off holiday debt. Overall, total household debt increased by 2.2 percent or $15.5 trillion from the third to the fourth quarter of 2021.
Several financial experts shared their strategies for managing holiday debt and preventing future spending regrets.
Pay down debt quickly. “The `Ghosts of Christmas Past’ can end up haunting you for the rest of the year if you don’t get them paid off quickly,” said Jamie Bosse, lead financial planner for Aspyre Wealth Partners.
She recommends that consumers determine how much debt they have left and set a deadline to pay it off, ideally in two to four months. She also suggests finding ways to earn extra cash to help pay down debt faster, such as selling clothing, gear or kitchenware, or picking up side work, such as driving for a delivery service.
Make a plan and budget. “The people I have seen be successful with paying off debt are those who come up with a plan to dramatically cut their lifestyle for a short amount of time to pay off the debt as quickly as possible,” said Corey Noyes, a financial advisor and owner of Balanced Capital. Planning also can help avoid future debt.
“Christmas isn’t the kind of thing that sneaks up on you,” Noyes said. “Start setting money aside early so you can buy gifts with cash rather than a credit card.”
Bosse suggests making a list of all of the people for whom to buy gifts, set an amount to spend and start saving now. “The key is to plan for Christmas spending all year round,” she said.
Start a separate account. Bosse also suggests estimating total holiday spending and dividing the amount by 12, or the number of months left until the holiday. “If you can set up direct deposit to put that monthly amount away directly, it will be out of sight, out of mind,” she said.
Be smart about credit. Credit cards can be valuable financial tools if used responsibly. Andrea Woroch, a consumer and money-saving expert, recommends transferring balances to a card offering 0 percent interest on balance transfers. These promotions often offer between 12 and 21 months to pay off the debt without incurring interest charges.