Holiday Credit Card Debt is Out of Control. Can You Enter The New Year In the Black?
Dec 03 | 2024
holiday spending
Photo by Tessa Rampersad on Unsplash
You’ve heard it a thousand times before. The holidays are about two things: giving and family…more specifically, giving to your family. And no one wants to be the Grinch.
So we lavish gifts and good tidings on our families and friends. And it feels incredible when it comes to gift-giving — I’m insatiable. Spending on the holiday spirit feels like a worthwhile use of your funds — from the decorations to the delicately wrapped gifts. But when the holiday season wraps up, the last thing anyone wants to unwrap in the new year is a mountain of credit card debt.
Unfortunately, it’s a reality many face after the festive cheer fades away. I call it “Post-Christmas Clarity.” It happens when my credit card statement comes due and it doesn’t matter whether I’ve been naughty or nice, the credit card company is still coming to town.
I know I’m not alone in this. For one, my friends and I try to practice financial transparency so we’ve recently been talking about it: how expensive this time of year is. Black Friday helps, it helps to get gifts for deals. But … it’s also tempting to get gifts for yourself and overspend on sales.
But I also know I’m not alone because the studies show that most Americans overspend during this time of year. Tis the season for indulgence — on food, on shopping, and on spending.
Why are most Americans in debt?
Here are some quick but alarming statistics:
- 30-35% of Americans surveyed take on debt for holiday spending.
- 25% of Americans still have holiday debt from last year
- Americans hold an average balance of $5,733 per cardholder
Classic financial moguls will tell you that it’s your fault. They’ll say that Americans just need to give up credit, tighten their belts, and learn to control themselves. But it’s not our fault. The average credit card interest rate has risen from around 16% to nearly 21%. And with the state of inflation, just surviving costs more than ever.
The obligations of the holiday season are pushing many Americans over the edge. But you can still enjoy your holiday while spending less and working to pay off your debt. It’s not a matter of skipping out on the fun — FOMO is a big driver of overspending — but rather it’s about spending in alignment with your values.
For example, my love language is gift-giving. I love to splurge on my loved ones during this time of year. And while I also love treating myself with DoorDash and festive drinks, I can cut down on those things for a month or two while funneling those savings into my gift budget. And instead of feeling like I’m denying myself every time I say no to my local coffee shop, I transfer the $8 I would have spent into my holiday savings account so I can see the money I’m saving and feel like it’s worth it.
I do the same when I’m eyeing a sale. Do I need another Reformation going out top or can I put that $70 into my gift budget? This is just one way to reframe your spending habits. For me, it helps me keep my spending in check during the holidays by decreasing my other expenses and finding joy in shopping for absolutely stellar gifts.
If you’ve found yourself feeling more financial anxiety than holiday cheer, fear not. You can still enter the new year on a brighter note by taking charge of your finances. Here’s how you can regain control, make a plan for your finances, and enter the new year in the black — or at least, a little less in the red:
How to start your debt payoff journey while still enjoying the holidays
Assess the Damage: Before you can chart your course to financial recovery, it’s crucial to understand the extent of the issue. Just as in the world of life edits and planners, a reflective assessment of your financial landscape is paramount.
Face Reality: Avoid sugar-coating your situation. Make a comprehensive list of all your debts, including the interest rates. Sometimes the real amount owed might differ from what you think.
Negotiate Rates: Pick up the phone and inquire about lowering your interest rates. Even a slight reduction can significantly ease the burden. If you can’t lower your rates, try lowering your other bills. Your internet bill, your cable bill, even your subscriptions. For many credit cards, you can even ask to get the annual fee waived. You have a lot more power than you think. If you threaten to cancel, you often get offered a lower monthly payment.
How to spend less on holiday expenses without skimping on holiday cheer
Don’t spend mindlessly, spend with a plan: How much do the holidays actually cost? It seems like you blink and the holidays are over, the damage done. Write down exactly what you mean to buy and exactly what it all costs. Is there anything you can get for cheaper? Anything that’s less necessary on your list? If you need some help answering these questions, keep reading.
Audit your gifting list: 10.6% of holiday gifts (about $428 billion in value) were returned and about two of every three customers will return at least one gift in the 2021 holiday season. So if there’s a gift on your list you’re not sure about, rethink it. Especially if it’s a higher ticket item.
Utilize Coupons, Deals, and Cashback Offers: Coupons, promo codes, and special deals are every day. If you missed Black Friday, don’t get tricked by retailers taking advantage of your last-minute shopping. Avoid impulse buys by taking a moment to think before swiping that card. Use cashback apps or credit cards that offer rewards or cashback on holiday purchases. Use price comparison websites or apps to find the best deals before making a purchase.
Consider Homemade Gifts: Get creative and craft personalized gifts like handmade ornaments, baked goods, or DIY crafts. Not only are these thoughtful, but they can also save a bundle. This is also a time to utilize what you know about love languages. Many people value acts of service or words of affirmation over physical gifts. Offer to do a task for them or write them a long, heartfelt letter. Instead of material gifts, consider gifting experiences such as concert tickets, spa vouchers, or cooking classes
Organize Gift Exchanges or Secret Santa: If you have a large family or group of friends, suggest a gift exchange or Secret Santa. This way, each person only buys one gift, reducing overall expenses.
Plan Potluck Dinners or Parties: Share the load by organizing potluck-style gatherings where guests bring a dish. This not only reduces your spending on food but also creates a sense of community.
Shop Smart for Decorations: Opt for reusable decorations or consider buying after-holiday clearance items for the following year. DIY decorations or repurposing existing ones can also save money. Shopping small can also come with savings. You can even check on local marketplaces for people trying to offload Black Friday purchases they already regret.
Limit Travel Expenses: Holiday travel is where they get you. Book flights and accommodations well in advance to take advantage of early bird deals. Or, if it’s too late, make use of credit card rewards. Worst case scenario, take the long way — flights with connections and layovers are often way cheaper. Consider flexible travel dates and look for budget-friendly options like staying with family or friends.
DIY Wrapping and Cards: One big cost is wrapping paper. Try using plain paper and adding personal touches. Make your own holiday cards or opt for e-cards to save on paper and postage costs. Reuse packaging from your own holiday shopping or packing paper that often comes in boxes. Get resourceful! And make it fun!
Strategies to actually pay off your debt
Balance Transfer: Consider transferring high-interest debts to a card offering a 0% interest rate. This move can buy you time without accumulating more interest.
Budgeting: Knowing where your money goes is key. Utilize budget apps to track your expenses and set up a realistic plan.
Trimming Expenses: Small adjustments can accumulate into significant savings. Cut back on unnecessary expenses without resorting to extreme deprivation. Prioritize essentials over luxuries. Distinguish between what you need versus what you want
Stay Focused on Goals: Remind yourself why you’re pursuing financial freedom. Visual reminders or joining support communities can help maintain focus.
Learn and Grow: The journey to financial stability is also about learning and evolving. Apply lessons from your debt repayment journey to establish enduring financial habits. Remember, emerging from a cycle of debt isn’t an overnight process. It demands commitment, persistence, and patience. By taking proactive steps to understand your situation, draft a plan, and cultivate healthy financial habits, you’re positioning yourself for a more financially secure future.
The new year doesn’t have to start with debt dictating your life. Instead, it can mark the beginning of a journey toward financial empowerment and freedom.
- 30-35% of Americans surveyed take on debt for holiday spending.
- 25% of Americans still have holiday debt from last year
- Americans hold an average balance of $5,733 per cardholder
