More Americans got into the spirit this holiday, even if it meant spending more than they could afford.
Between buying presents, plane tickets and party supplies, 36% of consumers went into debt, owing an average of $1,249, according to a survey by LendingTree.
Most holiday borrowers with debt put it on their credit cards, although for the first time, nearly 40% of Americans used so-called buy now, pay later financing to spread out their expenses, the report found, which polled more than 2,000 adults from Dec. 14 to Dec. 20.
Buy now pay later has exploded in popularity with the rise in online shopping during the pandemic; however, studies show installment buying could encourage consumers to spend more than they can afford.
Although these programs let shoppers break their purchases into equal payments, often interest-free, there could be late fees, deferred interest or other penalties if you miss a payment.
Credit cards, on the other hand, are one of the most expensive ways to borrow; with interest rates of more than 16%, on average. If you have bad credit, you’ll pay even more: Roughly one-quarter of borrowers have an APR between 20% and 29%, LendingTree found, while 9% had an APR higher than 30%.
By the end of the holiday season, Americans are on track to have $70 billion more in credit card debt and balances are expected to rise even higher in 2022 as consumers continue to increase their spending, according to a separate forecast by TransUnion.
Usually, card balances decline in the beginning of the year as borrowers pay off their holiday purchases.
This time, paying down debt will be a challenge, most said. In fact, 82% of those with holiday debt won’t pay it off within a month, LendingTree found, despite sky-high interest charges.