It's tradition to find presents under the tree on Christmas morning, but this year there may not be as many.
“Thirty-three percent are planning to spend less on the holidays this year,” said Ted Rossman, a credit card analyst with Bankrate.com. “Only 9% are spending more. I think that’s a wise choice.”
“I would strongly recommend not going into any more debt,” added Ryan Moore, a financial analyst with Kingman Financial Group. “I would go back to what the true Christmas spirit is and spending quality time together. Maybe you can do it over a Zoom meeting and spend Christmas that way. Even though it’s not the ideal spirit, it’s still better than going into debt and hurting yourself.”
Rossman advised resisting the urge to pull out the plastic for presents.
“What’s dangerous about that is that credit card rates remain very high,” he said. “The average is about 16%. We hear all this stuff about record-low interest rates and that may be true for mortgages and car loans, (but) it’s not really true for credit cards. They’re still very expensive.”
You could find yourself spending several years paying off $1,000 worth of gifts.
“With this debt hangover, you’re only making minimum payments. It could take you five years to pay it off and that could cost you another $440 in interest,” said Rossman. “So I think that you really do need to practical here."
It means maybe spending less but being more creative.
“People may be in a lot of debt right now and I would hate for them to go into more debt,” Moore said.
His suggestion might not be the most popular, but it is by far the most practical if your finances are floundering: Do not do gifts.
“Probably your family members that you’re buying gifts for are in the same situation that you are, so they might say, 'Hey, I’m not expecting anything from you this year,'" Moore said. “I don’t think anybody’s family actually wants them to go into debt.”
Consider giving an experience rather than an item if gifts are a given.
“Could you walk someone’s dog, cook them a meal, watch their kids for a date night?” Rossman said. “Are there things you can do that still have that spirit of giving, but without putting a whole lot of money out of pocket?”
You might already have a stash of cash to spend that you forgot about.
“Maybe you already have credit card rewards that you could put to use if you’re sitting on a pile of cash back," Rossman said. "Maybe you redeem that and you can even get gift cards or statement credits or something like that can help you defray the costs."
Or make it a gift from the group.
“If it’s a big-ticket item, maybe you want to go in with other family members to help purchase the item,” Moore suggested.
Watch out for payment plan options at retailers. They may give you more time to pay, but you could also end up paying more than the purchase price.
“Some people like these buy-now, pay-later companies like Affirm or Afterpay,” Rossman said. “It’s tempting. Maybe you have no interest if you pay it back within six weeks. That’s often how it works, but if you don’t then there can be fees and interest beyond that.”
The holidays last a season, but the debt racked up paying for presents can last years.
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