As you peruse the aisles on Black Friday, look at the shoppers to your left and to your right: One of you, in all likelihood, still hasn’t paid for the gifts you bought in 2023.
American consumers are heading into the holiday shopping season with an alarming amount of debt left over from last year’s holidays, balances lingering on card statements like stale turkey.
In one holiday shopping survey, the personal finance site WalletHub found that 47% of consumers still carry debt from last holiday season.
In another poll, NerdWallet found that 28% of consumers who used cards to buy gifts in 2023 haven’t paid off their balances.
A third survey, from Intuit Credit Karma, found that one-third of consumers are heading into the holidays with at least $5,000 in debt.
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“Americans are entering the holiday season in the red,” said Emily Childers, consumer financial expert at Credit Karma.
The credit card landscape looks bleak
The nation’s credit-card landscape looks bleak. Half of all cardholders are carrying debt from month to month, as of mid-2024, the highest quotient since early 2020.
The nation’s collective card balance is a record $1.17 trillion, LendingTree reports. The average cardholder with debt owes $7,236. Delinquency rates are rising.
To make matters worse, credit-card interest rates are higher than ever. The average card rate is 20.42%, Bankrate reports. That’s a hair below the all-time record, 20.79%, set in August.
Retail credit cards, popular in the holiday season, carry even higher rates. The average rate on store cards reached 30.45% this year, an all-time high, Bankrate reports.
“This is definitely not the holiday season that you want to take on debt,” said Melissa Lambarena, personal finance expert at NerdWallet.
Debt-saddled consumers plan to go right on spending
Clearly, Americans are concerned about holiday debt. A majority of consumers are stressed about holiday finances, according to an Experian survey. Nearly two-thirds of shoppers acknowledge that they spend too much.
Yet, many consumers plan to go right on spending, and borrowing, in the holiday shopping season.
In the NerdWallet holiday survey, three-quarters of consumers said they plan to put gifts on credit cards, rather than pay cash.
In the WalletHub survey, 52% of shoppers said they plan to apply for a new card for holiday shopping.
A holiday survey by Debt.com found that 66% of holiday shoppers plan to take on debt.
“Americans are feeling squeezed in the holiday season, and it’s not just inflation,” said Howard Dvorkin, chairman of Debt.com. Dvorkin said his company has surveyed consumers on debt in past years, and the share who plan to take on holiday debt “used to be under 50%.”
Shoppers may also be taking more time to pay off their debt. WalletHub surveys holiday shoppers annually. In 2022 and 2023, roughly one-quarter of consumers said they were still paying off debt from the past holiday season. In 2024, the share rose to 47%.
“So, we’re talking about double the amount,” said Chip Lupo, a writer and analyst at WalletHub.
Some cardholders simply stop making payments on their holiday debt. The national delinquency rate hovers above 3%, the highest level in more than a decade, according to federal data.
The ‘minimum payment’ credit card trap
More often, consumers make only minimum payments on their cards. If you make the minimum payment, you’re probably repaying the debt at a very slow rate.
“And that doesn’t do anything but make it more expensive,” Lupo said.
Bankrate estimates that if you start out with $1,000 in card debt at 17% interest, and you pay the minimum, you will still owe $886 after 12 months.
Many consumers try to skirt high interest rates with deferred interest promotions. In a typical scenario, the shopper puts a large purchase on a store card and then has six or 12 months to pay it off without owing any interest.
But the interest is still there, and if the buyer misses the payoff deadline, it all comes due.
“The moral of the story is, however you choose to pay for these things, always read the fine print,” Lupo said.
With those cautionary words in mind, here are a few tips for completing your holiday shopping without digging a deeper hole of debt.
The 24-hour rule
When you put a holiday gift in an online cart, Childers suggests, wait 24 hours before you buy it. That rule is a way to slow down your spending, giving you time to think about each gift.
Alternately, allow yourself only one gift purchase per 24 hours. Again, the goal is to slow down, creating time to deliberate on each purchase.
Take a break from social media
Many young consumers say social media drives their holiday spending, Childers said. Droves of TikTok holiday posts, for example, are essentially ads.
“So, taking a break from social media can really help,” she said.
Delete your saved cards
The holiday season is a good time to remove any credit or debit cards you have saved on a computer or phone, Childers said. Force yourself to retype the numbers every time you make a gift buy.
“Make it a little harder to make those purchases,” she said.
Set a gift budget
In the fog of holiday shopping, no amount of spending seems quite enough.
Happily, several sites offer holiday budget calculators: A starting point for planning your spending.
In setting your budget, Lambarena said, prioritize “how much you need to pay monthly to pay off the debt.” Tell loved ones you are on a budget. Set spending limits.
More:Afraid of overspending on holiday gifts? Set a budget. We’ll show you how.
Go thrifting
At their best, thrift stores can function as discount vintage stores, and who wouldn’t want a vintage gift?
If you have loved ones who are into such things, consider thrift store gifts.
“You can get some really good deals,” Lupo said.
Exchange gift cards
Here’s another idea to consider, if you think your loved ones would be receptive: a gift-card exchange.
Challenge family and friends to find gift cards they haven’t used, Lupo said, and regift them to people on your list.