You haven’t bought a single gift yet, and the credit card statement from last December is still sitting in your inbox. That’s not a coincidence. Holiday debt from one season routinely bleeds into the next, and the season that just ended left more of it behind than the one before it. If you want this year to look different, the window to change it is now, before the sales start and the payment plans show up at checkout. Here’s what holiday debt actually costs, and how to keep this year’s spending from becoming next spring’s balance.
Why Holiday Debt Keeps Climbing
Holiday debt isn’t a single bad decision. It’s a season of small ones that stack up between November and January: a gift here, a flight home there, a work party outfit you didn’t budget for. Each purchase feels manageable on its own. Together, they add up to a balance that outlasts the decorations.
Retailers make the math easier to ignore, too. Buy now, pay later options split a $200 gift into four $50 charges, and store cards dangle a discount at checkout in exchange for a new line of credit. Neither shows up as one big number in the moment. Both show up as one number later, on a statement.
How Much Holiday Debt Americans Are Really Carrying
The most recent season set a new high. According to LendingTree’s December 2025 holiday debt survey, 37% of Americans took on holiday debt, averaging $1,223 per person, up from $1,181 the year before. Parents with kids under 18 fared worse: 48% went into debt, carrying an average of $1,324.
The repayment timeline is longer than a single paycheck cycle. Only 37% of people who took on holiday debt expected to pay it off within two months. The other 63% expected it to take three months or more, meaning most shoppers who took on holiday debt were still carrying December’s charges into spring.
A separate survey from Consolidated Credit, released the same November, found 36% of respondents were still carrying a balance from the prior year’s holiday shopping before the next season had even started. That’s holiday debt compounding on holiday debt, one year rolling into the next without ever fully closing out.
Credit Cards and Buy Now Pay Later Are Doing the Heavy Lifting
Credit cards financed 62% of holiday debt last season, and buy now pay later apps covered another 35%, according to LendingTree’s data. Store credit cards accounted for 32%, with some shoppers using more than one method. 40% of people carrying holiday debt were paying an interest rate of 20% or higher.
That interest rate matters more than the sticker price ever will. A buy now pay later balance that starts at 0% interest can turn into real debt fast if a missed payment triggers a late fee or gets sent to collections. A credit card balance at 20% APR left over from December is still accruing interest when the credit card statements arrive in March, quietly making every gift you bought more expensive than the price tag said.
Build a Holiday Budget Before the Sales Start
Set a total dollar amount for the entire season now, covering gifts, travel, hosting, and the smaller expenses that get missed, like shipping and wrapping paper. Write down every person you plan to buy for and assign each one a number. When the total holiday budget is set before Black Friday emails start arriving, you’re deciding your spending limit instead of discovering it in January.
Compare that number against what’s actually in your bank account, not what you expect to have after the next few paychecks. A budget built on income you haven’t earned yet turns into debt the moment a paycheck comes in short.
Use a Sinking Fund Instead of a Credit Card
A sinking fund is a savings account you build specifically for a known future expense, and the holidays qualify. Open a separate account now and set an automatic transfer for each pay period between now and December. Even $25 a paycheck adds up to real money by the time the season starts, and it’s money you’ve already earned instead of money you’re borrowing against next year’s income.
Paying from a sinking fund instead of a card is what keeps a holiday budget from turning into a January statement. Starting that fund in September instead of November gives it three extra months to grow before you need it.
If You Already Have Holiday Debt, Make a Payoff Plan Now
If last year’s balance is still on a statement, treat it the same way you’d treat any other credit card debt: list the balance, the interest rate, and the minimum payment, then commit real dollars to it before you spend anything new this season. The habits that work for paying off credit card debt on a tight budget apply here as well, including automating extra payments and pausing new charges until the old balance is gone.
Carrying an old balance into a new shopping season is how one year’s holiday debt turns into two years’ worth. Closing out the old balance before opening any new one breaks that cycle.
Frequently Asked Questions About Holiday Debt
How Much Holiday Debt Do Americans Take on Each Year?
The average was $1,223 last season, up from $1,181 the year before, according to LendingTree. About 37% of Americans took on some amount of holiday debt.
Is It Bad to Use Buy Now Pay Later for Holiday Shopping?
Not automatically, but it adds up faster than it feels. Multiple buy now pay later loans across different apps and due dates can total more than a single credit card charge would, and missed payments carry late fees just like any other debt.
How Can I Avoid Going Into Debt for the Holidays?
Set a total budget before the shopping season starts and save toward it in a dedicated account instead of covering the gap with a credit card. Starting three to four months ahead turns a lump sum into small, manageable transfers.
What Should I Do if I’m Still Paying Off Last Year’s Holiday Debt?
Prioritize paying it off before you take on new holiday spending this year. List the balance and interest rate, commit to a fixed payment toward it, and avoid new charges on the same card until it’s paid off.
When Should I Start Saving for the Holidays?
As early as possible. Starting in September or October instead of November gives a holiday sinking fund more paychecks to draw from, which lowers the amount you need to set aside each time.
Final Thoughts
Holiday debt isn’t fixed by spending less on any one gift. It’s fixed by deciding your total budget before the season starts and paying for it with money you’ve already saved, rather than borrowing against next year’s income. Last season’s $1,223 average did not stem from a single bad purchase. It came from small charges that went unplanned and uncounted until the statement arrived. Set your number now, build the fund to cover it, and let this be the year the balance actually reaches zero by spring.
Photo by micheile henderson: Unsplash