The holidays bring out the best and worst in people. And they always tend to make consumers go into debt. Find out which ones are the most willing to extend themselves over the holiday season — and why.
Sixty-one percent of those who carry a card balance are willing to add to their deficit this holiday season, compared to 30 percent of cardholders who do not currently have credit card debt, according to a new CreditCards.com poll.
And more than half (52 percent) of millennials surveyed said they are willing to add to their debt, as opposed to 49 percent of Gen Xers and 34 percent of baby boomers.
Judith Corprew, executive vice president at Patriot Bank, said it’s concerning how many people — particularly young adults — who already have credit card debt are planning to add to that amount this holiday season.
“Credit cards typically have some of the highest interest rates of any type of debt, meaning that the longer you maintain a balance, the larger the debt you’ll accumulate,” Corprew said.
And, she added, keeping large credit card balances can hurt your credit score because your credit utilization ratio could get too high.
Check out these other notable results from our holiday debt poll:
- Those in debt are more willing to add to it. More than half of credit card debtors (51 percent) said they think the holidays are a valid reason to add to their debt, but only a small percentage of those with no debt agreed (26 percent).
- Kids matter. When it comes to the holidays children are the stars — almost two-thirds of parents (65 percent) with kids under 18 said they would be fine with adding to their card debt during the season and more than half (56 percent) responded that they felt it was fine to do so.
- Genders differ. Men with credit cards are more willing to take on holiday card debt than women (50 percent versus 41 percent).
- The right reasons? Among cardholders who are willing to take on credit card debt this holiday season, almost half (46 percent) said it was to please a family member or friend and a large percentage (42 percent) said it was to make themselves happy. Thirty-eight percent said it was to please their children and another 38 percent said it was to make their partners happy.
- The big payoff. Those surveyed shared their plans to pay off that holiday debt: More than half (57 percent) said they would pay more than the minimum each month, some planned to cut expenses (38 percent), others (21 percent) said they were planning to get a balance transfer card, a few (18 percent) said they planned to get a side hustle and even fewer (16 percent) reported they intended to sell unneeded possessions.
The survey of 2,571 U.S. adults was conducted online between Oct. 2-4, 2019. See survey methodology.
See related: Holiday shopping and credit card guide 2019
Millennials might not have a fundamental understanding of debt
The fact that more than 60 percent of credit card debtors are willing to go into further debt is a testament to the natural social pressure to get gifts for those you genuinely care about. It’s also an implication that the more you spend on somebody, the more you care about them, said Matt Edstrom, CMO of GoodLife Home Loans.
While there might be good intentions behind wanting to demonstrate a high degree of care and love for those around you, it’s a destructive pressure to put on yourself, whether you’re in debt or not, he added.
Edstrom said it also means that either people are unaware of the true repercussions of going further into debt, or they are simply apathetic.
The fact that 52 percent of millennials don’t mind going further into debt points toward not having a fundamental understanding of the consequences, he reasoned.
“While I’m sure some fall into the latter category of simply feeling apathetic, many young people have not been properly educated on how to deal with debt — or even basic money management techniques — so the consequences of accumulating debt don’t resonate with them because they probably haven’t had to deal with its fallout in their lives yet,” Edstrom said.
Older consumers are less likely to make debt mistakes
Older consumers are somewhat less likely to make these financial mistakes because they have experienced the consequences, said Mike Sullivan, director of education at Take Charge America, a nonprofit credit counseling service.
But even the oldest consumers are not immune.
Senior citizens on a fixed income will sometimes carry credit card balances even though they know it is a bad idea.
“The emotional pull of spending on others is often stronger than the realization that the consumer cannot afford some expenditures,” Sullivan said.
See related: Detecting, preventing senior card fraud, abuse
Men have been conditioned to spend more
Scott Gillespie, owner of SG Financial Coaching, said men are probably more willing to go into debt over holiday spending than women because they want to feel as though they have provided for their loved ones.
“But to go deeper in debt is to do the opposite of providing,” Gillespie said, “It’s taking away from their livelihood by loaning away their future for the novelty of a holiday.”
We, as a society, are trained to appear successful and capable of providing more and more, when in reality some people just can’t because they are broke, according to Gillespie.
“It may sound harsh, but why else would any person — man or woman — take out credit card loans at high interest rates so they can celebrate the holidays?” he said.
“We need to wake up as a society to the sobering truth of basic personal finance,” Gillespie added.
Panic usually results in debt payment ‘plans’
Sullivan said that in his business he rarely encounters consumers with real plans for paying off debt.
The “planning” usually happens after people discover they can’t make the minimum payments, according to Sullivan.
And the first plan is to borrow more money to pay off the old debt (this is reflected in the 21 percent who said they intended to do balance transfers).
“Regardless of how they pay off this debt, few consumers seem to realize that carrying credit card balances is likely to increase the cost of holiday spending by 10 percent if they are very vigilant and way more if they are careless,” Sullivan said.
Make a holiday spending plan early and avoid debt
Corprew recommends developing a holiday spending plan as early as possible to anticipate expenses and how you will pay for them.
For example, if you plan on spending $500 for holiday gifts this year, saving a part of each paycheck you earn between now and then could enable you to have that amount when the times comes.
“If you do need to charge some purchases on your credit card, try to limit the cost by having a plan to repay as quickly as possible and avoid interest charges,” Corprew said.
“Financing your holiday expenses with a credit card costs about 20 percent extra because credit card rates are so high,” said Ted Rossman, industry analyst at CreditCards.com.
Rossman, like Corprew, said a better strategy would be to plan ahead of time — set aside a dedicated amount each month throughout the year, take on that side hustle, sell those unnecessary items or sign up for a balance transfer or 0 percent APR credit card sooner than later.
Credit card debt is easy to get into and hard to get out of — most people in credit card debt have been there for at least a year, according to Rossman.
See related: Beware the aftermath of holiday credit card shopping
CreditCards.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,571 adults, including 2,143 credit card holders. Fieldwork was undertaken Oct. 2-4, 2019. The survey was carried out online.