Americans Incurred an Average 2021 Holiday Debt of $1,249

Posted by Matin Varshochi in DebtJanuary 14, 2022(Last Updated July 26, 2022)4 min read
Key Takeaways
  • A recent survey released by LendingTree revealed that 36% of holiday shoppers in 2021 took on an average of $1,249.
  • The main factor behind the large percentage of shoppers going into debt was using the buy now, pay later plan, which allowed consumers to purchase expensive items and pay them off in installments.
  • However, due to this plan, some people overspent, leading to them being caught up in the debt cycle.
  • Below is a list of ways to prevent yourself from getting into debt in the future when purchasing gifts for your loved ones.
Are you ready to make some real money moves?

Over the past holiday season, a survey done by LendingTree discovered that Americans incurred an average debt of $1,249 when shopping for holiday gifts. Although it may be important to ensure loved ones receive all the gifts they wish for, going into debt causes more harm than good. 


Image Credit: Andy Dean Photography //


Why Shoppers Went Into Debt


Many shoppers went into debt due to the new buy now, pay later financing method used by large retailers for large purchases. This new purchasing method allows the shopper to pay for holiday gifts in installments over a period of time. 


By paying off the cost of gifts in installments, many shoppers realized their small sum of spending money had increased in value. Furthermore, out of the 2,000 people who were interviewed for this survey, 40% mentioned they used their credit cards when holiday shopping.


There is a false social stigma to overspend for gifts to ensure your family members have everything they want and more, and it puts additional pressure on them to purchase as many gifts as possible. Matt Schulz, Chief Credit Analyst at LendingTree, mentioned that the added stress is one key reason so many people incur debt during the holiday season.


Image Credit: Phil.Tinkler //


Effects of Going into Debt


Going into debt can have long-lasting effects, which can negatively impact your financial situation for years to come. Firstly, going into debt makes it difficult for you to pay your other bills and previous debt that has yet to be paid, such as student loans


Consequently, by purchasing as many gifts as possible for your loved ones through maxing out your credit cards, it causes your monthly debt payments to increase, negatively affecting your financial position. Furthermore, more money going towards paying off your debt hurts your credit score, reducing your chances of receiving loans for significant purchases.


Thus, it is essential that you take steps to ensure that you do not end up in the debt cycle for a prolonged period of time. Below is a list of possible ways to prevent yourself from getting into debt in the future. 


Image Credit: szefei //


How to Prevent Going into Debt in the Future


The main reason people incur holiday debt when buying gifts is due to them not knowing their limit, causing them to max out their credit card balances. To ensure this does not happen in the future to you, here are a couple of ways to make sure it doesn’t happen.


Know Your Limits / Don’t Go Over Budget


Many people go into debt during the holiday spending period because they do not know their limits, causing them to incur credit card debt. Therefore, to prevent yourself from receiving credit card debt in the future, you must know what your budget limits are and how much you can spend. 


Once you go over your budget, it becomes difficult to pay your bills, resulting in high-interest rates on your outstanding debt. 


Explain your Situation


Sometimes, the lack of communication could explain why your personal finances are not ideal after the holiday season. When loved ones are younger, the goal is to give them the most gifts possible to make them happy. However, if these actions cause your personal loans to increase, it may not be worth it. Instead, look at alternatives to how you can still give gifts without going over budget.


If your loved ones are mature enough to have a somewhat decent understanding of what happens in the real world, sit them down and explain that not everything they may wish for will be easy for you to purchase. Instead, tell them to make a shortlist of their top three, and they will receive one of them, as long as it is in your budget.


By explaining your financial situation, your loved ones will understand that you are doing your best despite your limited financial resources, and it will lessen your chances of going into debt. 


Try Cost-Effective Gifts 


Lastly, the best way to ensure the money you pay during the holiday season is kept to a minimum is through gifting cost-effective gifts. Although cost-effective gifts may not be something you wish to gift, they show you significantly care about someone without overspending to purchase a gift that portrays the same message.


The purpose of the holiday season is to enjoy the company of your loved ones. Sometimes, it is not financially wise or possible to give the gifts our loved ones deserve. However, this is not an excuse to overspend and go into debt to purchase their desired items. It is essential to try and get them gifts to show your appreciation towards them, but it is also important to know when to draw the line, so you do not negatively impact your financial situation.


What are some other ways to prevent yourself from getting into debt? Let us know in the comments below. 


Main Image Credit: Zivica Kerkez //

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