The Truth About Christmas Spending and Debt

“It’s Christmas.” You hear that as a viable excuse every year when someone goes overboard in their spending or buys an extravagant gift that is out of their price range.  Somehow unwise purchases are acceptable during the last month of the year. People don’t think; their financial logic goes out the window. Unfortunately, the repetitive bad decisions will only come back to haunt them. Before you go out and splurge when you really shouldn’t, read these sobering statistics on Christmas spending and credit card debt.

• Americans spend $525 billion over the holiday season
• Online spending has increased 12%
• Christmas spending is back to pre-recession levels
• Savings have increased from 1% to 6% of income in the past several years

Sounds somewhat promising, right? The statistics make it appear that the economy is thriving and shoppers are out spending their hard-earned money in droves. The truth is that, yes, shoppers are out, but they are not spending their money. At least, not money they’ve earned yet. In fact, many Americans have become accustomed to “charging” the entire holiday. Presents for the kids courtesy of Visa. Dinner for the office staff thanks to the generosity of MasterCard. Out of town flight to spend Christmas with the grandparents made possible by American Express.   Before you think of those as acceptable solutions to having cash on hand this holiday season, try these next stats on for size.

• The average person spends  just under $1,200 over the holidays – including food, gifts and travel
• At least 23% of that was paid for by credit card
• 6 million people borrow to pay for Christmas each year
• Americans average 13 credit cards per person
• When paying by credit card, people tend to spend 112% more than if paying with cash
• A minimum monthly payment is usually 90% interest, 10% principal
• One third of bankruptcies filed in March site overspending at Christmas
• The average American spends 40% more then they earn

Americans have been trained to think that love and friendship at Christmas somehow equates to buying expensive gifts. The truth is that no one who truly loves and cares about you wants a gift from you that puts you into debt. If everyone was just honest about their credit card bills and concentrated on spending less over the holidays, January would be a lot less stressful all around.

So, what’s the solution? It is as simple as ABC. Accept that you can’t spend like Paris Hilton. Budget for the holidays like you would any other expense. Commit to spending less for Christmas each and every year. If you stick to your guns, you may even inspire a friend or family member to do the same.  Enjoy the holidays without the use of plastic.