The Holiday Borrowing Risk List
Ch. 2. What is Holiday Borrowing?
The holidays can be extra stressful if your bank account doesn’t have much wiggle room, and so many people choose to fund their holiday spending through credit cards or short-term loans. That means borrowing money to finance travel, gifts, parties, decoration and extravagant meals during the holiday season.
In 2016, one in five people surveyed said that their existing debt – be it from student loans, car payments or other kinds of borrowing – would impact their ability to buy things during the holidays.4
Millennials were the generation most likely to take on holiday debt in 2016:
Around 14% of Millennials surveyed said they were planning to take on holiday debt, compared with only 7.6% of seniors.5
According to the Deloitte 2017 Holiday Retail Survey, around a quarter of respondents said they would prefer to buy experiences or spend money on gatherings with friends, family or co-workers this season.
The average person will still buy 14-15 gifts, and spend around $430.6
The most popular places to shop are online, in department stores or discount stores, as consumers are becoming increasingly smart about factoring in things like free shipping and holiday sales.7 This year, as in years past, online and mobile purchases are predicted to continue to increase in popularity, with big retailers like Amazon projected to see a 10 percent increase in purchases during the holiday season.8
If you don’t have that $430 already in your bank account just waiting to get spent, you’re a lot more likely to get yourself into a risky credit situation during the holidays. In order to fund holiday fun and cheer, many people sign up for deferred-interest credit cards, which offer low introductory interest rates, but can come back to haunt you if you aren’t able to pay the balance off before the six or 12 months of interest-free financing are up.
Additionally, there are many lenders out there promoting “Christmas loan deals” or “holiday borrowing specials” specifically for people who can’t afford to fund their gift and travel spending upfront.
Make no mistake: the kind of lender who would promote a Christmas loan is not your friend. They’re nothing more than dangerous payday lenders wearing crude Santa suits.
Don’t trust them!