Debt Consolidation

When Do People Fall Behind On Their Bills?

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Many people live paycheck to paycheck, relying on the next deposit that will hit their account to cover their living expenses, bills and debt payments. Despite many people having no or little savings on which to fall back, the vast majority of Americans (95%) in the largest 100 metros manage to pay their bills on time.

Yet major annual events can have a big impact on consumers’ abilities to keep up with their bills — or increase the likelihood that they’ll fall behind. We wanted to find out when people are more likely to miss payments and when they’re more likely to catch up.

Study overview: When U.S. consumers fall behind on debt payments

We reviewed anonymized credit report data of LendingTree accountholders over 12 months (October 2017 to September 2018) and calculated the percentage of people current on all active accounts each month.

Our study reveals that, yes, U.S. consumers are more likely to fall behind on debt payments at certain times of the year. Here’s when consumers might need to be a little more worried about their monthly budgets, as well as when they’re likely to get caught up if they’re behind.

Key takeaways

  • More Americans fell behind on their bills in December than at any other time during the 12-month period we reviewed. This timing coincides with spending for the holiday season, suggesting that some consumers stretched past their financial limits to celebrate this festive time.
  • Americans played a bit of catch-up on their holiday debt in January but fell slightly behind again in February. Year-end bonuses possibly helped some consumers pay immediate bills but didn’t resolve over-extension from holiday debt.
  • Many people caught up with their bills in April — right around tax refund time, a sign that many people rely on their refunds to get them current and caught up on payments. (Tax refunds in 2018 were delayed for millions of taxpayers due to extra scrutiny for people claiming certain common credits.)
  • The jump in people current with their bills continued through September. This continued trend suggests that the tax returns, and possibly improving economic conditions over the summer of 2018, helped people manage their existing debts going forward.

Seasonal debt stress: When making payments is most painful

The results aren’t shocking, as they reflect major seasonal events that most Americans observe and experience firsthand.

The holiday season is a common budget-buster for many consumers, draining bank accounts and making Americans more likely to fall behind on debt payments from November through to February. That’s no surprise, given that the average shopper is projected to shell out over $1,000 to celebrate the holidays in 2018, according to the National Retail Federation.

But it’s not all bad news. January shows a slight decrease in late payments, which could be a sign that year-end bonuses or pay raises hit some consumer’s bank accounts and allowed them to catch up on overdue debts.

The biggest windfall, of course, is tax season. The average tax refund for returns filed in 2018 (for the 2017 fiscal year) was $2,825, according to the IRS — a cash infusion that helped even more consumers get current across all credit accounts.

The impact of these seasons of late payments

These trends reveal the imperfect ebb and flow of debt and finances many Americans face as they navigate monthly expenses with added seasonal pressure (and relief). Taking out extra holiday debt on top of existing debt can push people past their feasible monthly obligations, leaving them without the funds to cover all their bills and debt payments.

But while many Americans miss payments here and there (a typical credit report lists six late payments), missing a payment due date isn’t harmless. For one thing, some late payments incur fees and extend interest, which can lead to further indebtedness.

For another, late payments damage credit and are very hard on consumers’ scores. A late payment can have long-term, compounding effects on borrowers and potential borrowers, as each one can result in a derogatory mark on a credit report and a decreased credit score. Damaged credit will, in turn, make it more difficult – and more expensive — to get loans and credit going forward.

6 ways to ensure you can pay on time — no matter the season

Our study proves that seasonal changes in spending and income can have a major impact on consumers’ abilities to make debt payments on time.

But as an individual borrower, there are strategies you can use to effectively manage your monthly costs, avoid overspending and stick to paying on time. Here are some steps you can take to minimize seasonal effects on your ability to pay your bills.

Set a budget to which you can stick. Setting and following a budget is the best way to make sure you’re planning for debt payments and have the available funds to cover them. Track your expenses so that you understand where your money is going, and which times of month you’re most likely to have a low account balance. You can use this information to find places to cut back and carefully plan out spending to keep your account funded when payments come due.

Build up some savings. Tracking expenses can also help you find extra savings to build up a buffer of savings in your bank account. Having at least $1,000 up to a month’s worth of expenses means you can pay your current bills with past paychecks. This gives you more space to cover both regular bills and unexpected expenses with less stress and worry.

Avoid taking on more debt. If you’re struggling to keep up with the bills you already have, it is unwise to borrow even more money and add another monthly payment to your expenses.

Your priority should be to get your costs under control so that you’re living within your means — spending less than you’re earning each month. If you do have to borrow money, consider options such as holiday loans, which can be less expensive than high-interest debt such as credit cards. You can also plan for major expenses, such as holiday shopping or travel, and try to save up so you can buy them with cash rather than credit.

Adjust W-4 withholdings. Consider if you might benefit more from having that money spread out across your paychecks rather than one large check during tax season. If a taxpayer receiving the average refund changed withholdings so that they had no refund, for example, their take-home pay would increase by $235 each month. This extra monthly income could go a long way toward helping cover debt payments and other basic costs.

If you usually get a large refund, you might be able to change your W-4 withholdings to lower the amount of taxes taken out of each paycheck (this calculator from the IRS can help you estimate how many allowances to claim).

Pay off debt to free up cash flow. If possible, you might want to consider paying off credit card debt or loans ahead of schedule to eliminate monthly payments. Making extra payments on a low-balance debt can be a smart idea as you can more quickly pay them off and get rid of a monthly payment. It can also give you a quick win and keep you motivated to keep paying down debt.

Consider debt consolidation. High monthly payments can be the result of a balance that’s too high, or repayment term that’s too short, or interest rates that are too expensive — or some combination of all three.

If you struggle with high payments and interest rates, debt consolidation can be a good way to even out expenses into one manageable bill. Replacing high-interest debt, such as credit cards, with a new debt consolidation loan with a lower interest rate can help you save big each month and over the life of your debt. Choosing a longer repayment term can also ensure your monthly payments are manageable.

Remember, you and your bank account don’t have to be at the mercy of seasonal shifts in spending and earnings. By taking some of the steps outlined above, you can protect your finances from both expected and unexpected purchases and build financial security.

When you’re in the position to always make payments on time, you’ll see the benefits in less financial stress, a rising credit score and a monthly budget that’s easier to manage.


Using a sample of over 230,000 anonymized LendingTree user credit reports from October 2017 through September 2018, we calculated the percentage of users who were current on all their active accounts during each calendar month period.

LendingTree is a free credit monitoring service available to the general public, regardless of their debt and credit histories, or whether they’ve pursued loans on a LendingTree platform.  LendingTree has over nine million active users.


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