70% of Americans go over budget during the holidays, survey finds: How to cut costs

The holiday season is a time for gathering, generosity and gift-giving, but it can be hard to shower your loved ones with affection while staying on budget. 

Perhaps that's why 7 in 10 Americans say they typically overspend during the holidays, according to a recent consumer spending report from Affirm, a buy now, pay later financing company.

Nearly half of consumers (48%) plan to spend more money this holiday season to make up for missed celebrations in 2020 due to the coronavirus pandemic. Despite increased spending, shoppers have made staying on-budget their top priority.

Thankfully, you don't have to choose between having an unforgettable holiday season and sticking to your budget. Keep reading for tips on how to avoid overspending during the holidays and learn how you can make the most out of your shopping budget by utilizing rewards credit cards.

You can compare cashback credit card offers without impacting your credit score on Credible below.

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Holiday shopping tips to help you avoid overspending

There's considerable pressure to spend money during the holiday season, which can strain your finances. More than half of Americans say they have anxiety over holiday shopping, according to Affirm's report.

Here are a few tips for responsible holiday spending:

• Create a realistic and inclusive holiday budget 
• Start shopping early, and be wary of shopping holidays
• Utilize rewards credit cards with cashback

And if you're still struggling to pay off last year's holiday debt, consider credit card consolidation below.

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Create a realistic and inclusive holiday budget 

While dropping a few hundred dollars here and there on holiday shopping may not seem like a big financial commitment, it can add up to thousands before you know it. Here are a few tips to ensure you're setting an accurate budget:

• Analyze last year's holiday spending. Use a free budgeting app to go through your bank statements and determine where you went over budget last season, so you don't make the same mistakes again. You may find that you spent much more money than you realized.
• Set a spending limit with family gift-giving. For example, you and your siblings may commit to spending no more than $50 on nieces and nephews. In addition to making budgeting more seamless, this can also help ensure no feelings are hurt.
• Factor in the cost of holiday meals. To cut costs, turn your traditional Christmas dinner into a potluck. If your loved ones don't cook, consider asking them to handle some of the grocery shopping. And skip the single-use table settings for an elegant (and more cost-effective) celebration.

It may seem like a common-sense rule, but sticking to a budget is a surefire way to avoid overspending during the holiday shopping season. 

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Start shopping early, and be wary of shopping holidays

Ideally, you should be saving up all year to do your holiday shopping, so you're not throwing off your December budget by hundreds of dollars. 

But the holidays have a way of sneaking up on you — before you know it, local artisans have set up shop at holiday markets downtown. Brick-and-mortar department stores are outfitted with glowing decorations and delicate glass ornaments. By now, it may even be too late to purchase this season's hottest toys, jewelry and other trendy merchandise.

An easier way to spread out holiday costs is to start your shopping early. Instead of spending $600 in the month of December alone, you might spend $200 per month on holiday shopping starting in October. In fact, the majority (61%) of consumers surveyed by Affirm said they no longer wait for Black Friday and Cyber Monday to begin shopping for gifts.

And think twice before you pull out your credit or debit card on one of these popular shopping holidays. Often, the deals advertised are not as competitive as they may seem. Instead, use price tracking tools online to monitor cost changes for big-ticket items like electronics and smartphones. The bottom line: Do your research to avoid going into debt for the "perfect gift."

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Utilize rewards credit cards with cashback

Select credit cards may provide users with up to 5% cashback on certain purchases, which is a simple way to get rewarded for the money you're already spending. Plus, some issuers let you apply your cash rewards to your statement balance, which reduces the overall cost of borrowing.

But credit cards can be a gateway for overspending during the holiday season if you're not careful. That's why it's important to only spend what you would pay for in cash, and pay off the entire statement balance each month to avoid high interest charges and fees. 

Also keep in mind that most reward credit cards require applicants to have a good credit history.

If you stick to your budget and don't charge more than you can repay, then you may be able to utilize a rewards credit card to supplement your holiday budget. You can compare offers for multiple rewards credit cards on Credible's online marketplace.

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Bonus: Consolidate credit card debt with a personal loan

Holiday overspending can lead to expensive long-term debt. One of the largest holiday stressors among American consumers is incurring more debt than they can repay, according to Affirm.

Now may be a good time to come up with a debt payoff plan if you're still struggling to repay last year's holiday shopping bill. One popular way to get out of credit card debt is to open a personal loan.

Unsecured personal loans are lump-sum loans that you repay in fixed monthly payments over a set period of time. Because they don't come with variable interest rates and minimum payments like credit cards, personal loans offer a more structured debt repayment plan.

Compared with credit cards, personal loans also offer lower interest rates. The average personal loan rate in Q2 2021 was 9.58%, per Federal Reserve data, compared with 16.30% for credit card accounts assessed interest. So, you may be able to save money on interest charges over time by refinancing your credit card debt with a personal loan.

You can see your estimated personal loan rate without impacting your credit score on Credible. Then, use a personal loan payment calculator to determine if credit card debt consolidation fits into your budget.

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