How to Avoid Taking on Debt for the Holidays

The holiday season is fast approaching, and many Americans are already preparing for the financial aftermath that may linger well into the new year. According to Gallup’s latest holiday forecast, Americans are planning to spend around the same amount on gifts as they did last year, with an average expenditure of $1,007, which is close to record highs. However, a survey conducted by the American Institute of CPAs (AICPA) revealed that almost half of those planning to spend on gifts and travel anticipate taking on debt to fund their holiday expenses. This is despite many individuals expressing their intention to limit their spending, as rising prices are causing shoppers to spend more even if they are purchasing fewer items.

The holidays are notorious for being a financial strain due to gift-giving, attending end-of-year parties, and traveling to visit family. This year, however, many Americans are already feeling the pinch from higher prices on everyday essentials, with approximately 24% of U.S. households living paycheck to paycheck in 2025. This means that holiday spending could add additional financial stress to consumers who are already struggling to make ends meet.

A significant portion of holiday spending is expected to be charged to credit cards. The AICPA survey showed that about 79% of individuals planning to spend on gifts or travel this holiday season intend to use a credit card, with more than half of them not planning to pay off their holiday balances in full when due. Among those expecting to carry holiday debt, 17% anticipate taking over six months to pay it off, and a third plan to utilize flexible payment options like buy now, pay later (BNPL) services to manage their expenses.

The emotional pressures associated with the holiday season can exacerbate the financial strain, as many people feel obligated to purchase gifts they cannot afford. This behavior, termed “guilt-giving” by Beyond Finance, a debt settlement company, often leads individuals to overspend. Additionally, some individuals engage in “FOMO-spending,” where the fear of missing out on trends or keeping up with friends drives them to make impulse purchases.

To avoid unnecessary holiday debt and budget effectively, it is essential to set a spending plan before the peak shopping days arrive. Determine a budget for gifts, travel, and entertaining, and stick to it to avoid overspending. Consider crafting handmade or DIY gifts to save money, but be mindful of overspending on materials and supplies. If traveling during the holidays, utilize credit card points or miles to reduce costs and book early to secure lower prices.

Managing holiday debt requires a strategic approach, with the objective of paying off balances as quickly as possible to avoid accumulating interest charges. While BNPL plans can offer convenience, it is crucial to stay on top of payment due dates and avoid accumulating excessive debt. By setting a realistic payment plan and being mindful of financial obligations, individuals can navigate the holiday season without accruing unnecessary debt.