With the holidays upon us, so is gift-giving and, inevitably for most, holiday debt. With seasonal holidays are upon us, it’s no surprise that annually, Americans’ credit card debt tends to increase in November and December. As of last year, the average holiday debt of 1 in 3 Americans was $1,249. Average spending varied significantly, however, by age demographics with Gen Z taking on about $821, Millennials $1,444, Gen X $1,139, and Baby Boomers $1,078. Regardless of age, 1 in 5 Americans regretted taking on so much holidaydebt, and about 40% have not paid off their debt yet.
Perhaps shockingly, Gen Z (anyone born between 1981-1996) were more likely to have paid off their holiday debt than Millennials and Gen X (anyone born between 1967-1986). Regardless of age, all demographics’ holiday debt consisted largely of buying plane tickets, presents, and party supplies. Holiday debt is an expensive endeavor considering that the average interest rates of credit cards were more than 16% on average. At the same time, it doesn’t seem to faze most Americans since we’ve racked up more than 70 billion dollars in credit card debt as a nation.
Buy Now, Pay Later (BNPL) companies like Klarna and AfterPay have only made it easier for Americans to take on debt to buy what they need and want for the holiday season. While holiday debt is a financial burden, most Americans describe it as planned debt. Counter-intuitively, 65% of higher earners making $100,000 or more took on debt, while only 35% of Americans making between $35,000-$49,999 took on debt. Twenty-seven percent (27%) of those who took on holiday debt spent the most money on children, and only 9% on parents, and then 7% on someone else or friends.
Though holiday debt can be perceived as necessary debt, it’s still important to plan and take action to get back on track financially. Debtcan be transferred to a 0% balance transfer credit card that can offer a no-interest period for up to 21 months. Personal loans can refinance and consolidate multiple debts into a single payment. For those who have the support network of family who can lend money to help you pay off your holiday debt faster, that could be a low-stress alternative as well. It’s good to indulge for the holidays since it is only once a year but being financially responsible is a lifelong series of habits we can all take on, one choice at a time.