After a season of record holiday spending, here come the bills to pay for it all.
Retail sales hit a record $994.1 billion during this past holiday season, which ran from Nov. 1 to Dec. 31, according to the National Retail Federation. And a big chunk of that spending was on borrowed money. According to LendingTree, 36% of Americans took on holiday debt in 2024, averaging $1,181 per shopper for the season. That’s around 15% higher than the $1,028 on average the year before, but less than 2022’s $1,549 average.
“Prices are still really high and maybe having a bigger effect on people’s budgets and people’s holiday shopping and other sorts of spending than maybe people thought it would,” said Matt Schulz, chief credit analyst at LendingTree.
Many people who wound up in debt this holiday season said it will take them a while to pay it off. LendingTree found 21% of people who borrowed expect they’ll be paying it down for at least five months, and another 20% say they’re only making minimum payments — a recipe for racking up interest fees and dramatically extending how long it takes to zero out a balance.
U.S. household debt has climbed to record heights in recent years, reaching $17.94 trillion as of the third quarter of 2024, according to the Federal Reserve Bank of New York. It said consumers owed a record $1.17 trillion in credit card debt.
But while debt is up, many people’s incomes are, too. The New York Fed researchers said in November that Americans’ disposable personal income had grown to $21.8 trillion. That jump in average paychecks has helped narrow consumers’ debt-to-income ratio to 82%, down from 86% in 2019. And the credit rating agency TransUnion, in a separate report, found delinquency growth has slowed — a sign that borrowing, at least for some shoppers, has become a bit more manageable.
Still, there are plenty of risks to leaning on credit, and not just from traditional cards. “Buy now, pay later” installment loans have been gaining popularity for years, especially during the winter shopping period, and the services hit an all-time high this past holiday season. People spent $18.2 billion online with BNPL services from Nov. 1 to Dec. 31, according to Adobe Analytics, surpassing the $16.6 billion total in 2023 and $14.5 billion in 2022.
New data released this month by the Consumer Financial Protection Bureau found that BNPL borrowers often pile on debt. The agency reported that in 2022, most users had multiple installment loans open at the same time, and BNPL customers were more likely to carry high balances on other credit accounts. The findings add to long-running signs that BNPL services are attracting borrowers whose finances are already stretched thin.
“The problem with buy now, pay later is that because it’s so easy to get, people end up getting several of them at a time and stockpiling them and borrowing themselves into a little bit of trouble,” said Schulz.
How to tackle your holiday debt
Financial experts recommend several strategies for paying off debt.
There’s the snowball method — paying off the smallest debts first before working up to the largest ones — and the avalanche method, which involves tackling balances with the highest interest rates first. Experts say the avalanche method can typically save consumers the most money, limiting the amount of interest they’ll have to pay. Both approaches can blunt the financial impact of carrying a debt burden over time.
The highest-interest debts are on retailers’ own credit cards. Rates on these so-called store cards hit a record high, averaging 30.45%, Bankrate warned in September. That’s far higher than the average credit card interest rate, which is currently around 20% — down slightly since last summer but still near record highs.
Borrowers afraid of missing a payment or not being able to pay enough can call their credit card companies and ask them to lower their rates. BNPL providers like Klarna and Afterpay also offer extensions on some payment due dates. Whatever the credit product, financial experts recommend paying as much as possible, not just the minimum due. That might mean a tight budget to avoid overspending in the short term to focus on chipping away at outstanding balances.
Other options include 0% balance transfer cards, which let users move their balances from a high-interest card to one with ideally 0% interest to start. Personal loans can also be helpful, letting borrowers consolidate their debt into one place, typically with a fixed interest rate and set a monthly payment amount.
Ultimately, financial experts say borrowers should identify what led them to get into debt and make changes to avoid getting into financial trouble in the future.
“It’s really, really important when you’re going to try and drive down holiday debt or any other kind of debt, that you have a real, honest, updated assessment of your financial situation,” said Schulz. “That allows you to make the hard decisions you need to to make sure that you’re prioritizing putting whatever money is coming in where you want it to go.”
