Holiday debt strains consumers as traditions fuel overspending
A new survey by Consolidated Credit found that 36% of stateside consumers are still carrying debt from the 2024 holiday shopping season, but in Puerto Rico that figure is probably higher because of skewed personal and family values, traditions and a lack of financial education.
“The holiday season is notoriously stressful for parents as they try to meet their children’s expectations. They try to give them everything, and they keep them in the dark about financial difficulties,” Yesenia Otero, client services manager at Consumer, a local nonprofit financial counseling organization, told News is my Business.
Otero stressed the importance of teaching children the importance of saving money and of establishing and managing credit.
“These are the future governors, presidents, chief executive officers who could bankrupt companies and countries because they don’t know how to manage finances,” she said.
But many parents would rather struggle to keep up appearances than to tell their children that they are struggling financially, Otero added.
People who prioritize appearances risk serious financial difficulties, Leslie Adames, director of analysis and economic policy for Estudios Técnicos, told News is my Business.
“When you try to keep up with the Joneses, you can fall in a trap that leads to increased debt and financial fragility,” he said. “Consumers should approach the holidays with a more cautious mindset, be moderate and responsible in their financial decisions during the holiday season so that they don’t find themselves in a more difficult situation the following year,” he added.
Unfortunately, many local consumers are thoughtless about their spending, Otero said.
“The level of irresponsibility here is incredible. Why do you think there are only three big banks in Puerto Rico? When U.S. banks come here, they have to leave because of high loan delinquency, because customers aren’t responsible with their payments. They buy what they want, charge it to credit cards, and if they can’t pay it, they just say, ‘The devil pays the last one,’” she said, quoting a local saying.
Credit cards are an addiction, Otero continued. “It’s a sickness, and if you don’t tackle it in a responsible way, you can lose your house, your car, even your job. That’s why the mindset needs to change.”
Local tradition and customs play a role in that mindset. “For example, food stamp use here is passed down from generation to generation. Many people using food stamps have jobs, new cars, and because the government continues to approve the stamps over and over, people get used to it, and they think they deserve it,” she said.
A lack of financial education also contributes to the unhealthy spending habits of Puerto Rico consumers.
“Many don’t know any better,” Otero said. “I’ve seen that with first-time homebuyers who fail because of credit card debt and other loans. We have to educate them because they don’t understand the importance of credit until they try to buy a home.”
The first big purchase most Puerto Rico consumers make is a car, which makes them ineligible to buy a house because local car payments often are higher than mortgage payments, she explained.
What consumers can do
To mitigate the holiday debt hangover, Otero encourages her clients to limit their use of high-interest credit cards and BNPL plans, pay existing holiday balances before layering new debt, take advantage of Christmas Clubs at banks and credit unions, and adopt payment plans that alleviate monthly payments and interest rates.
“We advise our clients to start the year with a 50-30-20 spending model. Assign 50% of your income for what you need, 30% for what you want and 20% for savings. At least 10% of your monthly income should go to savings,” she said.
Consumers also need to let go of the notion that holiday gifts should be expensive. “Give hugs instead of gifts. Spend more time with family. Value simplicity,” she said.
