Here’s How to Deal With Holiday Debt

The average American household racked up $1,496 in holiday debt in 2019, according to the accounting firm Deloitte. While it’s hard to tell what exactly the end of 2020 will bring, Deloitte projects a 1% to 1.5% increase in household holiday spending.

In short, the holiday season is expensive, and for many, it results in additional debt that will have to be dealt with in the coming year. It gets worse, though. According to the Federal Reserve, less than half of people with credit cards pay off their balance in full each month. The majority of people will be carrying that debt for months, accumulating additional interest payments and digging their financial hole even deeper.

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    Holiday-related financial stress is real

    It’s not just the debt, either. According to a survey from Harvard Medical School, 62% of respondents found that the holiday season brought about “very or somewhat” elevated stress levels. This rise in stress is a key factor in the increase in serious medical conditions that crop up during the holiday season.

    Marcus by Goldman Sachs also recently conducted a survey on the topic of holiday spending and reported that 50% of Americans feel that buying gifts is the most financially stressful time of the year.

    People spend lots of money to have the perfect holiday season, only to find themselves stressed out and sick. But you can beat the financial — and emotional — stress this year. Here’s how.

    Focus on time together, not expensive items

    During your holiday celebrations, focus instead on having meaningful time together with a few thoughtful gifts rather than stressing yourself out trying to make everything perfect with expensive gifts and elaborate meals and plans. Your family would rather have a few simple gifts and a simple meal rather than having you stressed out during the holidays and stressed out from debt later on. The perfect holiday season is made with people, not with stuff.

    [ Read: 4 Ways to Better Understand Risk in Your Personal Finances ]

    Aim to buy fewer gifts for the people in your immediate family, but focus on making them meaningful, thoughtful gifts. If you recall your holiday memories, you’ll find this to be true: you remember perhaps one or two really thoughtful or memorable gifts, and the rest have just faded away over time. This is the Pareto principle applied to the holidays — 80% of our memories come from 20% of the gifts. Focus on those thoughtful and memorable gifts, and cut down sharply on the rest. 

    Remember, the thing that most of them will really remember more than anything is a low-stress you, giving them time and attention rather than a flood of gifts while you’re frazzled.

    Do the difficult tasks well in advance

    Almost every significant task that people tackle during the holidays can be handled well in advance of actual holiday preparations. This drastically reduces stress, and can also save money. 

    The gift purchasing can begin today, giving you more time to find a thoughtful and inexpensive item at a great price. The gift wrapping can begin as soon as you have the gifts in hand. 

    The meal preparation can begin weeks in advance with the initial meal planning and grocery buying, and most elements of the meal can be prepared days or even weeks in advance and frozen or refrigerated until the big day. You can rely on slow cookers to help with meal preparation on the day itself, moving items from the fridge into a slow cooker.

    Even when the big day arrives, you don’t have to fall into a trap of stressing out and throwing money at last minute problems. Learn how to deal with last-minute holiday crises without ratcheting up the stress or emptying your wallet.

    If you do overspend, immediately apply a debt repayment plan

    If you still find yourself in January having overspent during the holiday season, and you’re carrying credit card debt or other consumer debt, make a debt repayment plan and start following it immediately.

    A debt repayment plan is simply an ordered list of your debts. You can order these debts by interest rate, with the highest debt at the top, as this results in the smallest total amount of interest you have to pay. You should then make minimum payments on all of your debts, then make the biggest possible payment on the top debt on the list until it’s paid off. 

    Ideally, you’re not accruing any more debt while doing this debt repayment plan, so it makes sense to pair it with some smart cutbacks to your spending.

    Reduce the interest rate on your holiday debt

    Before you dive too deep into your debt repayment plan, it’s worthwhile to try to lower the interest rates on your debts, particularly your higher interest rate debts. There are two strategies you can use.

    [ More: Compounding Interest on Credit Cards Works Against You — Here’s How to Beat It ]

    One, you can contact your card issuer directly and request a credit card interest rate reduction. Call the number on the back of your card and politely ask about an interest rate reduction. The first customer service representative you talk to likely won’t be able to make that change, so ask to be transferred to someone who can make that change. They may say no, but a yes is money in your pocket.

    The other strategy is to use a balance transfer offer from another card. Many credit cards offer great balance transfer offers when you sign up. If you do that, transfer the balance from your highest interest rate card, but on your debt repayment plan, treat this transferred debt not by the new rate, but by the rate you’ll eventually have to pay when the introductory offer wears off. 

    Clean out your closets

    One strong approach to paying off holiday debt is to clean out your closets. You may need to do this anyway when you put away holiday decorations and less-compelling gifts. Use free time right after the holidays to evaluate the stuff that’s accumulated in your home and consider selling some of it off.

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    You can easily sell items in your community using Facebook Marketplace or Craigslist, and you can sell individually valuable items around the world using eBay. 

    Use the money generated from these sales to get a head start on your debt repayment plan. Make a big extra payment toward whatever debt comes first on your plan and you’ll likely be well on your way to getting rid of that debt!

    Once the debt is gone, start saving for next year

    Another useful tactic is to not stop when the debt is paid off. Once you have the holiday debt completely paid off, start saving money for the coming holiday season. 

    For example, if you put $250 a month toward your holiday debt from January to June, you could put $250 aside each month starting in July and have enough to pay for all of your holiday expenses out of pocket this year, with a little extra to boot (because you weren’t losing money to credit card interest). Then, the following year, you’d only need to save $125 a month to pull it off, which is far easier than dealing with a big pile of holiday debt.

    We welcome your feedback on this article. Contact us at with comments or questions.

    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to,, and elsewhere.