Debt Consolidation

Have to Borrow for the Holidays? Here’s The Smart Way to Do It

The holiday season can be a major budget-buster, adding the cost of gifts, festive foods, seasonal decor and travel on top of usual living expenses. A typical spender will drop $1,007 on the holidays this year, according to a National Retail Federation report.

Consumers who haven’t budgeted or saved for these major expenses might have a tough time covering all these costs out of pocket. If you find yourself in this situation, you might rely on credit to help pay for the holidays without emptying your bank account.

But taking on debt for the holidays can put you in a tricky spot, and you’ll need to proceed with caution. We’ll help you find a smarter way to borrow for the holidays this year.

How much Americans spend on the holidays

As mentioned, Americans will spend $1,007 on average for the holiday season. Here’s how holiday spending breaks down with average spending by category:

  • $638 on gifts
  • $215 on non-gift holiday items including food, decor and cards
  • $154 on purchases to take advantage of holiday deals


When it comes to gifts, shoppers drop the most, $506 on average, to treat family members. Friends come in a distant second with typical spending of $75, followed by co-workers and other gift recipients.

Among non-gift items, Americans spend more on holiday food, candy and treats, averaging $110. The next highest cost is decor, at $58.

The spending can begin well before December, too. People who host Thanksgiving dinner will have 11 guests, on average, and spend $334 on the meal, according to our recent Thanksgiving spending survey.

One cost that isn’t included in these estimates is travel. Not everybody will have this cost listed in their seasonal costs, but travelers making the trip home for the holidays can expect to pay even more. The average round-trip price of a flight around Christmas was $910 in 2017, according to flight price site Skyscanner.

All this spending can result in high debt levels for many Americans. Those who borrowed to help pay for their holidays in 2017, for example, owed an average of $1,045, according to the annual holiday debt survey from LendingTree subsidiary MagnifyMoney. Of the consumers who took on holiday debt, half said it would take them three months or longer to pay these balances off.

Holiday debt isn’t harmless, either. For many Americans, it can raise their monthly costs beyond what’s affordable and lead to missed payments. Our recent analysis of consumers’ credit payments found that from November until April (when tax refunds roll in) is when Americans are most likely to be behind on repaying debts.

How to reduce holiday spending

This level of spending is a big stretch for many shoppers. Here’s how you can trim spending:

  • Figure out what you can afford to spend. Take a second look at your budget to see what kind of wiggle room you have to pay for gifts and other holiday expenses. You can look for costs you can cut, such as eating out less or canceling entertainment subscriptions you rarely use, to free up funds for holiday expenses. Check your savings account to see if they hold money you can put toward holiday purchases.
  • Decide how to spend your holiday funds. Once you have an idea of how much money is available to spend, you can outline a plan for how to spend it. Create a list of items you want to buy for the holidays, then price out and prioritize the holiday purchases most important to you. This will help you see if you’re likely to overspend so that you can decide where to cut back without cutting into the magic of the holidays.
  • Watch your gift budget closely. Since this is the area where people spend the most, it calls for extra attention. Make a gift-giving list and start choosing gifts that match your budget for each person on it. It will always be tempting to get one more thing for a loved one, but don’t let yourself get too carried away with the spirit of giving. Stick to your gift list and budget.
  • Look for deals to stretch your dollars further. Creating a list will also help you keep an eye out for deals on the items you need to get. Check around and comparison shop to find the best deals on gifts. Take advantage of some of the lowest prices of the year. But don’t be swayed by a can’t-miss deal to overspend — stay committed to your holiday budget.
  • Don’t take on debt you can’t afford. Some shoppers won’t be able to cover every purchase in cash and will rely on credit to pay for some holiday purchases. If you do need to borrow for the holidays, be smart about it. Borrowing money will add interest to the costs of your purchases and place a burden on your budget in future months. Limit borrowing as much as possible and look ahead to repayment. You can think ahead to make sure you’re not taking on too much debt.

Borrowing for the holidays? Beware credit and store cards

If you’ve run through the steps above and have decided to borrow for the holidays, the next choice ahead of you is the type of credit you can use.

Credit cards are a common and often convenient way for many consumers to finance holiday purchases. Many shoppers already have a credit card or store card in their wallet, and it’s easy and simple to pull it out and use it to pay for holiday expenses.

But just because your credit cards are an easy way to pay for holiday purchases doesn’t make them the best option. Here are some potential downsides to using credit cards to borrow for the holidays.

You’re more likely to overspend with a credit card. The ease of swiping your credit card is a perk, but it can also make it too tempting to ignore your holiday budget. Because you don’t see the immediate impact of a purchase on your bank account balance, credit cards can make excessive spending feel harmless.

You’ll pay higher interest rates. Compared to other borrowing options such as a personal loan, credit cards have higher rates — sometimes upward of 20% or 25% APR. This high interest will add to your costs and keep you in debt longer than if you had a lower rate.

Take the typical holiday debt of $1,045. If this were charged on a credit card with a 25% APR, here’s what it’d look like (and cost) to repay it:

Typical Holiday Debt
Paid Off In Monthly Payment Interest Paid
3 months $362 $43
6 months $188 $77
12 months $99 $146
100 months $25 (minimum) $1,436


If you had a minimum monthly payment of $25 and paid only this, it’d take over eight years to pay off this balance — and you’d pay more than you borrowed in interest. Paying it off on a shorter timeline greatly decreases the interest you’ll pay, but it will require higher monthly payments to do so.

You might be enticed by credit card rewards. Many shoppers will use credit card rewards to justify spending too much for the holidays. If you spend more, you’ll earn points and cash back faster, right?

But it’s wiser to keep a whole dollar in your pocket than to spend it for 5 cents in cash back. And if you carry a balance, the interest you pay will often wipe out any benefit from earning credit card rewards.

High credit card balances can damage your credit. Shoppers concerned with their credit scores will also want to be wary of running up their credit card balances.

Doing so can increase their credit utilization ratio, which measures what they owe relative to how much they can borrow. If your balances get too close to your credit limit, your high credit utilization could keep your credit score from rising or even cause it to dip.

Skip retailers’ 0% financing and store card offers

Be cautious of financing offers from retailers, too. Many stores provide 0% financing on in-store purchases, typically through a store credit card.

But these offers for free financing too often have confusing fine print, according to a store credit card study from LendingTree subsidiary CompareCards. Deferred interest clauses are common, for example, which state that borrowers who fail to repay the full balance within the interest-free introductory period will have the full APR applied retroactively to their balances. Even worse, store cards carry some of the highest credit card rates with an average APR of 24.97%.

It’s clear why half of borrowers with a store credit card regret applying for the card — and why you should avoid them, too.

3 alternatives to carrying a credit card balance this holiday season

Charging a large balance on a credit card or store card is one of the most expensive ways to borrow for the holidays. There are better alternatives that you can turn to if you need the help of credit to pay for holiday expenses.

Here are some borrowing options to consider before defaulting to swiping a credit card and carrying a balance.

1. Consider a personal loan

If your holiday costs are adding up way faster than you can keep up, or they coincide with another major purchase, consider holiday loans. Maybe you have to fly your family out to a holiday family reunion, for example, or you want to take out a loan to pay for a surprise vacation. Many borrowers can get personal loan rates that beat credit card APRs, making them a more affordable way to cover holiday expenses than a credit card.

Of course, you’ll need to find the right offer to save. Our personal loan marketplace can quickly match you to lenders that can offer you favorable rates and terms. You can get matched to multiple offers in minutes, and easily compare lenders’ costs in one place.

2 . Borrow only what you can immediately repay

Using a credit card doesn’t have to mean paying interest automatically. Credit card issuers will not charge you interest if you pay off your balance in full each month.

Pay the full balance of your account at the end of the billing cycle by the payment due date, and you won’t be charged any interest for paying with credit. You can even use this credit card grace period to help cover holiday costs temporarily until your next pay period or end-of-year bonus.

This will be possible if you limit borrowing and keep your credit card balance low enough that you can pay it off completely. Make sure you double-check billing statements and due dates, too, to be sure you’re on track to pay on time and avoid interest.

3. Open a new intro 0% APR credit card

While retailer offers of 0% intro APR periods and store cards can be dangerous, there are a few good options to borrow interest-free. Many introductory 0% APR credit cards will let you borrow and repay a balance with no interest for an introductory period, usually 12 to 21 months.

The best introductory 0% APR credit cards also won’t have a deferred interest clause, so you won’t be penalized if you don’t quite pay off the whole balance before the introductory 0% APR runs out. Shop around to find a good option and apply. If you’re approved, you can use your new intro 0% APR credit card to pay for the holidays and pay it off in the new year, interest-free.

What to do if you racked up holiday debt

The holiday season is already well underway, and you might already have credit card balances from Thanksgiving travel, Black Friday shopping or other major purchases. You can take action now to manage holiday debt and set yourself up for success paying it off.

Here are some steps that can help you tackle holiday debt as you head into the new year.

  • Make a plan to pay off this debt. Figure out how fast you want to pay off this debt, or how much you can afford to pay on it beyond the monthly minimum. Send in these extra payments to quickly eliminate debt and lower your interest costs.
  • Consolidate holiday debt with a personal loan. Another option is a debt consolidation loan, which you can use to combine and replace debt you’ve racked up during the holiday season. This can simplify your debt payments, and can also be a chance to get a lower interest rate or choose a different term.
  • Transfer credit card balances to a low-interest card. A low-interest or introductory 0% APR credit card can be used for more than new purchases. You can also transfer existing balances to a new card with an intro 0% APR period and pay down the balance during the interest-free introductory period. But many cards will charge a balance transfer fee, so make sure you’re taking this cost into account.


If you’re borrowing for the holidays, it’s vital to take the time to decide how to do so. Choosing a low-cost credit option now will keep your debt more affordable and manageable in the new year.


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