With Christmas quickly approaching, many last-minute shoppers will soon scramble to purchase everything they need to make the holiday a success. In the rush to tick everything off their Christmas lists, they most likely will end up giving themselves the gift of unwelcome credit card debt, according to new reports from Goldman Sachs and Lending Tree.
Like ruined cookies, Christmas tree fires, and Gremlins, spending beyond your means has a way of ruining your Christmas. According to a survey from Marcus by Goldman Sachs, 53% of Americans cite expenses as the most stressful part of the holidays, beating even family issues (23%) and weight gain (23%) as the biggest cause for having the Christmas blues. The dread of piling on holiday credit card debt has even convinced 63% to go without gifts this year in an attempt to sidestep the spending trap altogether.
For those determined to celebrate Christmas no matter what the cost, nearly half (48%) will go into credit card debt buying gifts, paying for travel and otherwise making merry. Millennials again draw the short financial straw, with 60% of them expecting to assume credit card debt, compared with 50% of Gen Xers and 31% of Baby Boomers.
The debt incurred during the holiday season tends to stick around. An analysis of data from the Federal Reserve by Lending Tree reveals the country's credit card balances could grow by at least 5% between now and the end of the year. With the average amount of credit card debt at $9,333 for households that carry a balance (as opposed to paying off your bills in full each month), that means an increase in debt of at least $467.
Even if you don't decide to forgo gifts this Christmas or go on a vacation instead of celebrating at home, there are still some steps you can take to avoid taking on an unmanageable amount of credit card debt this holiday season.
Make holiday spending part of the plan. If you approach the holidays without a financial plan in mind, you'll find yourself influenced by the festive frenzy of spending and end up racking up more debt than you imagined. You should already have a household budget that determines how much to spend for each expense, and that includes the extra financial burden of the holidays. And if you don't, building one now is the perfect gift to give yourself (and your future).
Use the right credit card. Assuming you have more than one credit card (and the average American carries at least 2), you should make the best of your increased holiday spending by using a card that gives you great rewards. No amount of perks or miles is worth going into debt for. That said, if you know you're going to spend a large amount of money you might as well do so in a manner that gives you the most bang for your buck.
Cut down where you can. Sometimes heavy spending during the holidays is unavoidable, but that doesn't mean you have to completely wreck your financials between now and the new year. If you have to buy a pile of presents for the big day, then make up that money wherever you can, whether that's entertainment, dining out or any of the other luxuries that are considered splurges rather than necessities. You may not enjoy eating ramen noodles for the next few weeks, but it beats staring down an unwieldy credit card bill for months to come.