More Americans have incurred vacation debt this year, due to an average of $ 1,249
More Americans got in the mood for the holiday, even if it meant spending more than they could afford.
Between the purchase of gifts, plane tickets and party items, 36% of consumers were in debt, on average owed to $ 1,249, according to a LendingTree survey.
Most vacation borrowers in debt put it on their credit cards, although for the first time nearly 40% of Americans used what’s called buy now, pay finance later to spread spending, according to the report, which interviewed more than 2,000 adults from Dec. 14 through Dec. 20.
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Buy Now Pay Later has exploded in popularity with the increase in online shopping during the pandemic; However, studies show that installment buying may cause consumers to spend more than they can afford.
While these programs allow buyers to split their purchases into equal, often interest-free payments, there may be late fees, deferred interest, or other penalties if you miss a payment.
Credit cards, on the other hand, are one of the most expensive means of borrowing; with interest rates over 16%, on average. If you have bad credit, you’ll pay even more: About a quarter of borrowers have an APR between 20% and 29%, according to LendingTree, while 9% have an APR above 30%.
By the end of the holiday season, Americans are on track to have $ 70 billion more in credit card debt and balances are expected to increase further in 2022 as consumers continue to increase their spending, according to a separate forecast from TransUnion.
Usually, card balances decline at the start of the year when borrowers pay off their vacation purchases.
This time around, paying off the debt will be a challenge, most say. In fact, 82% of those with vacation debt won’t pay it off within a month, LendingTree found, despite very high interest charges.