More than 1 in 4 Americans expect to go into debt this holiday season

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In a Nutshell

Over a quarter of Americans (27%) think they’ll get the gift of debt this holiday season, a recent Credit Karma survey found. And more than 1 in 10 plan to take out a loan to cover their holiday expenses. But it doesn’t have to be this way — we’ve got some tips to help you avoid the holiday debt hangover.

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More than a quarter of Americans expect to go into debt this holiday season, according to a recent Credit Karma survey.

What kind of holiday purchases do people expect to drive them into debt this year? Survey respondents believe the top debt-inducing expense in 2019 will be gifts for children and immediate family members. Meanwhile, others say holiday meals and travel costs to visit relatives are most likely to push them into debt this season.

How far into debt? Forty-two percent of Americans expect to go at least $500 into debt during the holidays, according to our survey. And while one-third commonly put their holiday spending on credit cards, more than 1 in 10 Americans plan to take out a loan for their holiday expenses this year. (Learn about our methodology.)

All of this impending debt means higher levels of stress could be just around the holiday corner. In fact, almost half of Americans (45%) say they feel immense stress ahead of the holidays, our survey found. This can result in more arguments between loved ones — 25% of respondents say they argue with their significant others about going into debt leading up to the holidays — and even debt secrecy. Almost all (90%) of those surveyed who plan to take out a loan for the holidays also plan to keep it a secret from friends and family.

But your holidays don’t need to be full of stress, shouting and shame. And you don’t have to be visited by the ghosts of holiday debt when the new year comes around. Planning ahead, looking for deals and getting crafty are a few ways to help keep your holidays merry and bright.

Key survey findings

Over a quarter (27%) of Americans expect to go into debt this holiday season. More than 2 in 5 (42%) of those who expect to go into debt this holiday season anticipate taking on at least $500 of debt.
More than 2 in 5 (43%) Americans feel debt is unavoidable during the holidays.
Nearly a quarter (22%) of Americans who went into debt last year to finance the holidays are still paying off that debt almost a year later.
More than half (52%) of Americans said they would skip holiday gift giving if they could.
More than 1 in 10 Americans plan to take out a loan for the holidays this year. Of those respondents, 90% plan to keep it a secret from friends and family.
Most respondents who expect to go into holiday debt said they’ll likely go into debt to buy gifts for their children and immediate family (81%). Meanwhile, 20% say holiday travel will contribute to their holiday debt and 17% saying they will likely go into debt because of holiday meals.
Almost half (45%) of Americans feel intense personal stress leading up to the holidays, but the season is most stressful for millennials. Over half (58%) of millennials from our survey said they feel stressed around the holidays. Nearly a quarter (24%) of millennials say they’d rather use money spent during the holidays on travel, while 18% wish they could use money spent on gifts to save for a large purchase like a home or car.

See our 2019 Holiday Spending Forecast infographic


How much debt do Americans expect to take on this holiday season?

Given the pressure people feel to spend during the holidays, it’s no surprise that almost half (43%) of Americans from our survey said they feel holiday debt is unavoidable.

But just how much debt are people planning to take on this season? Most respondents plan to go a few hundred dollars into debt this year, our survey found — with more than 2 in 5 (42%) Americans expecting to go at least $500 in debt this year.

How much debt do you anticipate taking on this holiday season? % of respondents
$1–$50 2%
$51–$100 10%
$101–$300 20%
$301–$500 26%
$501–$1,000 24%
$1,001–$5,000 13%
Above $5,000 5%

 

Among those who went into holiday debt last year, more than two-thirds (69%) of respondents said they primarily funded their purchases with credit cards. But we also found that holiday loans could be increasingly common, with more than 1 in 10 (13%) American respondents planning to take out a loan this holiday season.

What holiday expenses could drive Americans into debt this year?

There are a number of purchases that people think they’ll make this holiday season that could lead to debt, and not all of them are related to gifts. Here’s what we found.

For what are you most likely to go into debt this holiday season? % of respondents
Gifts for my kid(s) 42%
Gifts for immediate family members 39%
Gifts for my significant other 25%
Travel to visit friends/family 20%
Holiday meals 17%

 

Why are people taking on debt for these items and experiences? Respondents’ replies about their actions last year could help shed light on this.

The top reason may not come as a surprise. The greatest percentage of respondents (39%) said they went into holiday debt last year because they simply didn’t have enough money to begin with.

At the same time, social and familial pressures could also be driving some to take on holiday-related debt: One-third of respondents said providing a better holiday for their children than they had motivated their holiday debt, while 27% said they promised they’d buy gifts for loved ones that were out of their price range.

The effects of holiday debt

Nearly half (45%) of Americans from our survey said they feel intense personal stress leading up to the holidays. This can have consequences for people’s relationships and finances.

For instance, our survey found that among people who plan to take out a loan to finance their holiday spending this year, 90% plan to keep it a secret from friends and family. And a quarter of those surveyed say they argue more with their partner about finances around the holidays.

In addition, holiday debt can have long-term financial consequences as people struggle to pay it off. In fact, we found that nearly a quarter of Americans who went into debt last year are still paying that debt off almost a year later.

And all in all, over half of Americans (52%) would choose to forgo spending on holiday gifts if they could.

So what would people rather be spending money on? When asked what they’d do with the money they’d otherwise use for holiday-related expenses, 21% of respondents said they’d use it to travel, 21% would use it to pay down debt, and 14% would put it toward savings for a big purchase like a home or car.


Tips to help you manage holiday spending

When it comes to the holidays, there can be a lot of demands on your time and money. But with a little planning and strategy, you can enjoy the fun of gift giving and spending time with friends and family without feeling burdened by debt.

And you’ll be in good company — 47% of respondents from our survey plan to make changes to their spending to lower expenses this holiday season.

1. Know your budget and plan ahead

A budget can be a helpful way to keep your holiday spending in check. Once you create a budget that includes paying off your existing debts, you can plan to set aside a certain amount for holiday expenses.

One tool to consider is the 50-30-20 rule, a budgeting method that suggests you spend 50% of your income on necessities (think rent and other bills) and 30% on fun. The remaining 20% is for paying down debt or for savings expenditures.

You could plan to break the 20% savings down into smaller categories if you have specific savings goals. For example, you could have 5% of your savings over the year go directly to holiday spending.

You may also want to have a talk with friends and family about expectations for spending during the holidays. We found that among those who plan to make changes to their holiday spending habits, 28% of those surveyed plan to save money this holiday season by agreeing upon a set budget with those they will exchange gifts with.

2. Look for deals year-round

The holidays happen around the same time each year, which can be really helpful when it comes to planning. Among those who plan to make changes to their holiday spending this year, nearly a quarter (23%) of those surveyed plan to save money this year by shopping for holiday gifts year-round.

So if you see something on sale in July that you can afford and know you can gift it to someone in December, go for it. You won’t have to compete with crowds and you may even be able to get it for a bargain if you purchase it during special sales events like Amazon Prime Day, which typically happens around the middle of the year.

Other ways people plan to save this year that could work for you include using coupons (43%), making sure you get price matching on purchases (40%) or shopping at outlet stores (33%).

3. Get crafty

Think about who on your list might appreciate something unique — a handmade hat, for example, or a pre-loved book. Over 1 in 5 (22%) respondents from our survey said they plan to give homemade gifts this holiday to save money, while 13% plan to buy used or consignment items, and 12% plan to regift.


Methodology

On behalf of Credit Karma, Qualtrics commissioned a nationally representative online survey of 1,028 Americans ages 18 and over in September 2019 to better understand how they spend during the holidays.