Opinion: Ignoring Overspending Warnings Now Will Leave Subprime Portfolios Exposed in Q1

2025 appears to be a robust year for holiday spending despite recent economic upheaval, from the government shutdown to escalating inflation.

Survey results from the National Retail Federation (NRF) are certainly encouraging. The survey found that consumers are projected to part with nearly $900 on seasonal extras this year, the second highest amount in the survey’s 23-year history. This is welcome news for both merchants and financial institutions.

Where is much of that money coming from, though? Some from savings and the cash in checking accounts, of course, but a good portion will be borrowed. Lenders need to be prepared to deal with what might be coming up in January: rising debt, delinquencies, and defaults. 

As with winter holidays of the past, consumers are committed to buying gifts, additional food for holiday celebrating, and decorations. Travel is a major expense, too.

A 2025 Deloitte survey found that just over half of the respondents intend to travel between Thanksgiving and mid-January, with an average spend of $2,334. Credit cards are the most popular way to pay for travel, according to Bankrate’s holiday spending report, with 63% charging those costs. 

Travel is one of the biggest expenses this holiday season, with travel spend averaging $2,334.

This surge in spending benefits businesses as well as people who want to carry on cherished traditions, while generating revenue for credit issuers. But it appears that the majority of celebrants are also heading into a tougher financial future that can turn into serious issues for lenders.

A November 2025 Beyond Finance/Talker Research study found that the majority of holiday shoppers haven’t developed a budget for the extra expenses and have started to descend into debt.

Sixty-four percent of survey respondents said they have already overspent or anticipated overspending. Just over half are putting those costs on their credit cards and one-fifth said they are using buy now, pay later (BNPL) plans. 

Certainly holiday-related liabilities are nothing new. The Beyond Finance study noted that roughly one-third of respondents said they have gone into debt in past years and will either accumulate the same or more debt this season. 

When December turns into January, all those bills will start to come due. To manage the payments, consumers will need to have steady income. But problems may be brewing that can cause borrowers to fall behind.

Indeed’s 2026 Jobs & Hiring Trends Report projects that unemployment will modestly rise while wage growth slows or stagnates. This may not be alarming on its own, but the report notes that the annual pace of inflation is now “running hotter” than wages are growing. 

The end result is that consumers’ purchasing power is expected to decline, as will their ability to incorporate the payments on the balances they acquired the previous month. Lower-income workers who tend to have less of a savings buffer will be hardest hit. 

Although consumers can spread credit card debt out with low installment payments, those who have taken advantage of multiple BNPL plans may find themselves in an especially difficult position this year. 

Adobe forecasts $20.2 billion will be spent through these short-term payment methods between Nov. 1 and Dec. 31, 2025, an 11% increase over 2024. 

A borrower juggling several BNPL plans with four-payment terms and who owes a total of $2,000 will be saddled with $500 payments until April. That can add more stress to an already tight budget.

If that consumer meets the terms of those contracts, they may not have enough to make the payments on their credit cards that are also swollen with holiday purchases.  

The holidays are a time for consumers to loosen their wallets and enjoy the season. When they’re in sound financial shape, the additional debt won’t be a hardship. 

Unfortunately this won’t be the case for many borrowers. The writing is on the wall: Many people plan on spending more than they can repay quickly and easily, job security is uncertain, and wages aren’t keeping up with inflation. The opportunity for lenders is to promote balance. 

To offset unmanageable holiday debt, credit issuers can encourage their accountholders to develop realistic budgets, spend mindfully, and prepare for the payments they will soon have to make. Practical suggestions include: 

• Reminding people who have rewards cards that they can use statement credits to lower their balances. 
• Highlighting how 0% introductory rate cards can help people borrow for the holidays without interest being added. 
• Promoting gift cards purchased through shopping portals. Cardholders can redeem their rewards instead of spending their own money, and sometimes get valuable discounts. 
• Sending tips on how to keep balances within reason and encouraging people to check their running total. 

In the end, when borrowers are in joyful financial positions, everyone — including lenders — can celebrate long into the new year.