Many U.S. consumers racked up debt this holiday season, and most of them won’t be able to pay it off immediately, according to a report published Wednesday.
Around 36% of consumers went into debt, spending on presents, plane tickets and decorations, owing an average of $1,249, up from 31% in 2020, according to a report by LendingTree. Despite the percentage of holiday borrowers increasing in 2021, the average amount of spending dropped by 10% from 2020.
“There’s a real divide in how Americans are feeling financially right now,” Matt Schulz, chief credit analyst at LendingTree, said in the report.
Individuals with the greatest likelihood of incurring holiday debt were parents with kids under the age of 18 and millennials ages 25-40, with around half of each group doing so, according to the report.
“The pressure on parents from kids, friends, relatives and from society in general to give until it hurts during the holiday is very real,” Schulz said.
Schulz highlighted that millennials are often still paying off student loans while also trying to save some of their paychecks.
“Millennials aren’t college kids anymore,” he said. “Many are getting married and starting families, and those things are really expensive. when you factor in inflation, it’s an even bigger issue.”
Nearly 40% of shoppers used “buy now, pay later (BNPL)” financing to purchase holiday gifts, up slightly from 37% in 2020, according to the report.
“High-income folks borrow, too,” Schulz said. “A large number of them have credit card debt, for example, so I’m not surprised that they’ve embraced BNPL.”
“They’re easy to get, give you a little bit of extra time to pay for something without any extra costs, are predictable and don’t leave you in the end with a lot of extra credit that could become debit in the future,” Schulz said of BNPL plans.
While financing holiday expenses is increasing in popularity, credit cards remain the leading form of carrying holiday debt, LendingTree reported. Roughly 62% of borrowers reportedly put the holiday debt on their credit cards, and just 23% used personal loans.
Meanwhile, holiday sales surged by 8.5% on a year-over-year basis from Nov. 1 to Dec. 24, according to a MasterCard SpendingPulse report. Online sales grew by 11% compared to the same period last year.
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