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The Cost of Christmas Debt

Ahh, Christmas. It comes around just once a year and brings joy and lots of cheer. It’s the season of giving and forgiving. It’s the season of cozy nights and settling in by a warm fire with hot chocolate. It’s the season of lights, ice skating and endless Christmas parties. But after the lights come down and the tree goes into storage, all you have is a wallet with a holiday hangover and no money left to your name.

The $483 Christmas Mistake

Sound familiar? You’re not alone. For many, overspending on Christmas is just a way of life.

This year, the National Retail Federation survey shows that holiday shoppers plan to spend $998 on everything from presents and pies to tinsel and trees.1 That’s all well and good when it’s a planned expense you can cash flow. But all that holly jolly can do a lot of damage when you put the whole Christmas shebang on your credit card.

Let’s say you get carried away and put $998 of Christmas spending on a credit card with an interest rate of 17%. And you decide to pay only the minimum payment of $25 each month because it just seems easier that way.

Get this: It would take you five years to pay off your balance! By the time it’s all said and done, your $998 worth of stuff would cost you $1,481.55—thanks to interest. Ouch! That’s an extra $483 (and some change) tacked on to your holiday bill—for just one year of Christmas spending. Imagine how quickly the dollar signs would stack up if you funded every single Christmas that way. No wonder Scrooge shows up every year . . . Bah stinkin’ humbug!

Listen: This isn’t just a credit card issue—the same goes for using services like Afterpay, Klarna and Affirm that let you pay for whatever you want in “easy” installments. Remember, anytime you owe money to anyone for any reason, it’s debt—and it’s going to weigh you down way more than those 10 Christmas cookies you just ate.

How to Avoid Christmas Debt

Going into debt—especially Christmas debt—is not the way to spend your hard-earned cash. But this cycle of going into debt for presents and Christmas cheer isn’t going to end unless you decide you’ve had enough.

We’re not saying you shouldn’t buy Christmas gifts for the ones you love. After all, giving is the most fun you can have with money. So, if you can’t afford to buy Grandma a fancy cashmere scarf this year, that’s okay! She’s had harder knocks in life (remember that whole reindeer incident?) and will still love you even if all you can afford to give her is your best batch of homemade cookies.

Are you ready to start saving like nobody’s business? Good. Here are some surefire ways to help you avoid Christmas debt with everything you’ve got:

1. Make a Budget

This is important! Making a budget on purpose before the month begins is the key to staying in control of your money. When you’re in a regular habit of making a zero-based budget every month, you won’t be caught off guard by having to buy an unexpected gift for your cousin’s new girlfriend. Why? Because you’ll have spent time planning your gift giving.

2. Say No to Credit

Swiping that credit card is easy. It may even give you a little bit of joy. But don’t fall for it. Every transaction you make with that credit card will drag you further and further into debt. Cut that sucker up and only spend what you have. And if you’re tempted to overspend, go back and look at your budget.

3. Save, Save, Save

Want to be a gift giver that rivals ol’ St. Nick next Christmas? Start saving right now. Yep—saving up for next Christmas is really pretty simple. Let’s say you want to budget $800 for Christmas 2022. Divide $800 by 10, then set aside $80 each month from January through October. Ta-da! By November, you’ll be ready to get a head start on your shopping.

Celebrate With a Credit-Free Christmas

Celebrating a credit-free Christmas will put a Santa-sized smile on your face that lasts all year. Here are the reasons you should celebrate Christmas without debt:

1. Less Holiday Stress

Your anxiety melts away when you opt for cash instead of cards, because you won’t have any payments! That’s right . . . paying with cash means you don’t have to worry about spending money you don’t have after Christmas. And even if you can’t buy everything on your list, you’ll hardly notice. You’ll be too busy feeling relieved about not having to make a payment next month.

2. No Interest Paid

Nada. Zip. Zilch. That’s how much money you pay in interest and fees when you stay away from credit cards. You don’t have to worry about that $40 sweater you bought for your best friend costing $55 come January. That’s a good feeling.

3. No Risk of Being Hacked

Target, T.J. Maxx, Home Depot—there’s a whopping list of stores whose databases have been breached by hackers. The thieves steal credit and debit card numbers and do a little Christmas shopping of their own. Use cash and don’t make yourself a target.

4. Surprises Aren’t Given Away

You probably want to keep that gift for your spouse a secret until Christmas morning. After all, that’s why people use wrapping paper! But it’s too easy for your spouse to check the credit card transactions and see where you did your shopping. Stick with cash and keep wearing your poker face until December 25.

5. Nothing to Pay Off Next Year

It’s a bummer to carry a balance on your card for that American Girl doll or new iPhone while you’re out shopping for the new school year. Nix your credit cards. Your future budget (and bank account) will thank you for it.

Things to Remember When Making Your Christmas Budget

Just because you’re on a budget this Christmas doesn’t mean you can’t join in on all those fun Christmas activities. Grab your partner, pour some eggnog, and pull up your EveryDollar app. Here are the must-haves for your holiday budget:

1. Christmas Meals

Are you hosting Christmas dinner for your family or bringing your favorite side dish to a potluck? Plan your Christmas recipes ahead of time so you can wow friends and family with your cooking (and budgeting) abilities. This can be your year to bring more than just a can of cranberry sauce.

2. Holiday Travel and Pet Boarding

Plane tickets and hotel rooms aren’t the only holiday travel costs to account for this time of year. Snacks at the airport, Uber or cab rides, parking, tips, and gas are some of the smaller expenses that can slip under your radar. Don’t forget to budget for these costs before you hit the road!


Start budgeting with EveryDollar today!

And just because you got an invitation to Aunt Betsy’s fancy Christmas party two states over doesn’t mean Fido did too. If your pet isn’t making the trip with you, make sure to budget for boarding fees.

3. Christmas Decorations

While you’re probably excited to string up Christmas lights as soon as you’re finished eating on Thanksgiving Day, you’ll still want to make a budget before buying that peppermint-scented candle or new addition to your snow village collection.

Bottom line? Only buy things you’ve budgeted for—like that new set of outdoor lights or an updated inflatable reindeer for the front lawn (the kids popped the one from last year, didn’t they?).

4. Christmas Shopping

The sooner you start saving for Christmas, the sooner you can start buying presents! Now, if that doesn’t help spur you on, we don’t know what will. And by starting early, you’ll actually have the time and the energy to find the best deals out there. Everyone knows about Black Friday and Cyber Monday, but the truth is, a lot of stores start offering discounts to Christmas shoppers much earlier than that.

But remember, you’re not out there shopping blindly. You already made your Christmas shopping list and budgeted for it—so if it’s not on your list, it doesn’t go into your cart!

5. Gifts You Usually Forget

You start off with the best intentions by making a list and checking it twice—but every year, you always forget somebody. Whether it’s gifts for teachers, coworkers, neighbors or even the mail carrier (yes, people actually do that), someone always gets left out. When you’re making your gift list, designate $20 in a category labeled “Miscellaneous Mysterious Person I’ll Probably Forget About.” See? Problem solved.

6. Higher Utility Costs

Christmastime means more visitors at your house—which means using more water, electricity, gas and heat. Brace yourself for higher bills thanks to more showers, more lights turned on, and more dishwasher loads. Ask your guests to help you keep costs down by cutting their showers short, shutting off the lights after they leave a room, and using paper plates to keep the dishwasher from constantly running.

If you don’t want 90% of your paycheck going toward your electric bill, don’t go too crazy with your lights display. For every minute it’s on, dollar bills are floating out of your pocket like fluffy snowflakes from the sky. We’re not saying you shouldn’t deck the halls—just keep it in check!

7. Christmas Cards

This one always sneaks up on us, doesn’t it? You might start off the season determined not to do the whole Christmas card thing. But then you get one in the mail from your cousin who had a baby this year, and seeing that newborn in a Santa hat reminds you how much your own kids have grown. The next thing you know, you’re searching online for the best family poses for Christmas card pictures—with matching outfits, of course.

Disclaimer: It’s okay not to send out a Christmas card. Nobody says you have to. Do what works for you. That could mean sharing a photo of your family on social media with a “Merry Christmas from our family to yours” caption or giving your neighbors warm wishes in person.

Have a Very Merry Debt-Free Christmas

There are plenty of ways to enjoy the Christmas season without all the Christmas debt. And if you’re choosing to make this the first year you ditch the credit card, congratulations! A merry Christmas doesn’t depend on how much money you spend—it’s about the people you’re sharing time with and the memories you’re creating along the way. 

So on that note, don’t repeat the mistakes of Christmas past. Go ahead and set up your Christmas budget with EveryDollar (our free budgeting app). You can track your spending to make sure you stay within your budget (with no unwanted surprises).

But don’t stop there. Start Financial Peace University and you'll learn how to manage your money well—including saving up enough for Christmas so that you don’t have to rely on debt. Ever again. With a little planning and prepping, you can stop the cycle of Christmas debt for good.

Anyone can do it—no elves required.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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