The holidays are over, but the credit card debt that resulted from it may stick around for a while. A new survey from LendingTree shows that 36% of consumers took on an average of $1,249 in holiday debt.
The survey found that more consumers ran up debt this holiday season when compared to 2020, when the COVID-19 pandemic led to a sharp drop in holiday travel. There were also fewer large celebrations during the 2020 holiday season before vaccines were readily available.
Millennials and parents with children younger than 18 years old were the most likely groups to take on holiday debt, at 50% and 54%, respectively. Both groups borrowed an average of $1,462.
In a change from previous years, almost 40% of people in the survey used buy now, pay later (BNPL) financing for holiday gifts during 2021, showing the growing popularity of this type of purchase. Instead of adding to a high-interest credit card balance, the purchase is paid for over a short period of time, usually with no interest charges.
BNPL purchases were most common among parents with young children – nearly two-thirds used it – along with households earning more than $100,000 a year.
The survey found that credit card lenders also got their share of purchases. Sixty-two percent of shoppers put holiday purchases on a credit card. Twenty-three percent of consumers used a personal loan to pay for the holidays, which was fewer than in 2020.
Getting help and budgeting are key
The task facing many consumers is how to pay off the debt before the next holiday season rolls around. In previous years, many savvy consumers enlisted the assistance of a non-profit credit counselor to set up a plan to pay down the debt. Christina, of Agawam, Mass., tells us she worked with Cambridge Credit Counseling Corp.
“They were great,” Christina wrote in a ConsumerAffairs review. “They helped me get rid of my debt, which is wonderful. The process was very simple. I gave them the information that I had and then I set up automatic payments with them so every month, they could take what they needed out of my account. It was very easy. A very nice person called me and let me know that October was my last payment. So everything's good.”
Matt Schulz, LendingTree's credit card expert, agrees that consumers need a plan to pay down their debt and the discipline to stick to it. The first step, he says, is making out a budget.
"You can't make a meaningful plan to tackle debt unless you know exactly how much money is coming in and going out of your household on a regular basis," Schulz said. "Once you know that, you can take stock in your spending and shift things around to match your priorities, including freeing up money to pay down debt."
But the LendingTree survey shows 82% of those with holiday debt expect to carry the balance for at least a month. Nearly 45% said they will try to consolidate their debt or open a balance transfer credit card.