Ghost of Christmas past: many consumers are still paying off their holiday debts

(Photo: Aaron via Adobe Stock)

Although spring has arrived, many consumers remember the holiday season every time they open their credit card statements.

Americans spent an average of $1,131 while on vacation in 2021, according to a recent MoneyGeek survey. Last month, four out of ten of them were still paying for their generosity.

On average, consumers billed 65% of their vacation spend. More than four in 10 put more than half of their vacation expenses on their credit cards, and a third charged all of their expenses. People with exceptional credit put the largest percentage of their spending on credit cards.

Among other discoveries:

Always paying. Survey respondents aged 35 to 54 had the highest level of unpaid debt at 48%. Only 17% of those with outstanding credit had not paid off their holiday debt in February. The average respondent carried a credit card balance for four months of the year.

Excluding people who paid off their cards monthly, respondents typically carried a balance for seven months of the year. A fifth of them carry a balance each month.

Holiday hangover. Almost one in five respondents said they regretted the amount they spent over the holiday season, although 7% wished they had spent more. Women were 35% more likely than men to regret spending too much, while people aged 25-44 had the most regrets overall.

Seasonal trends. Seasonal spending tends to peak in November and December. As a result, credit card debt typically increases steadily at the end of the year, then gradually declines through March as consumers pay off holiday debt. Overall, total household debt increased by 2.2% or $15.5 trillion between the third and fourth quarters of 2021.

Several financial experts shared their strategies for managing vacation debt and preventing future spending regrets.

Pay off your debts quickly. “The ‘Ghosts of Christmas Past’ can end up haunting you for the rest of the year if you don’t pay them off quickly,” said Jamie Bosse, chief financial planner at Aspyre Wealth Partners.

She recommends consumers figure out how much debt they owe and set a deadline for paying it off, ideally two to four months. She also suggests finding ways to earn extra money to help pay off debt faster, like selling clothes, equipment, or kitchen utensils, or taking on a side job, like driving for a job. delivery service.

Make a plan and a budget. “The people I’ve seen succeed in paying off debt are those who come up with a plan to drastically reduce their lifestyle for a short period of time in order to pay off the debt as quickly as possible,” said Corey Noyes, a financial adviser and owner of Balanced Capital. Planning ahead can also help avoid future debt.

“Christmas isn’t the kind of thing that sneaks up on you,” Noyes said. “Start saving money early so you can buy gifts with cash instead of a credit card.”

Bosse suggests making a list of everyone to buy gifts for, set an amount to spend, and start saving now. “The key is to plan Christmas spending throughout the year,” she said.

Open a separate account. Bosse also suggests estimating total vacation expenses and dividing the amount by 12, or the number of months remaining until the vacation. “If you can set up a direct deposit to directly put away that monthly amount, it’ll 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 that offers 0% interest on balance transfers. These promotions often offer between 12 and 21 months to pay off the debt without incurring interest charges.