November 29, 2022

Survey: Nearly 42% Expect to Go Into Debt to Pay for the Holidays

An early November survey from U.S. News & World Report shows that more than four in 10 respondents expect to go into debt to pay for gifts and travel during the holiday season.

When asked what methods they’ll use to finance the holidays, here’s how they respond:

The results aren’t surprising since two-thirds of respondents report they are at least a little concerned about having enough money to pay for the holidays this year. And 31.2% say they expect to spend more this year due to high prices.

  • Holiday mood: Nearly 59% say their excitement level for the holidays is the same as last year. Almost 20% say they’re more excited about the holidays this year compared with last year. But 21.7% say they’re less enthusiastic this year.
  • Holiday travel: Half of respondents say they aren’t traveling during the holidays. Among those who are traveling, nearly a third are traveling by car and only 13.2% are flying to their destination.
  • Credit card strategies: Just over 30% say they’ll be using credit cards with goals in mind, such as using a credit card to earn rewards or a sign-up bonus. But 32.6% have no credit card strategy for holiday shopping.
  • Shopping preferences: About 41% plan to shop only or primarily online. Just under 47% plan to shop both online and in stores this year. 

How Much Are Americans Spending on the Holidays This Year?

Just over 41% plan to spend $500 or less on shopping this year. At the other end of the spending spectrum, nearly 12% plan to spend $1,000 or more on shopping.

U.S. News

In last year’s U.S. News holiday spending survey, just under a third were planning to spend $500 or less. Trying to spend less this year might be a reflection of the yearlong impact of inflation on consumers’ wallets. When basic items cost more, consumers have less discretionary income to spend.

4 Ways to Avoid the Post-Holiday Debt Blues

I know prices are high, but if you plan carefully, you can avoid a holiday debt hangover in January. Here are four easy ways to prevent – or at least minimize – credit card debt in January.

1. Create a Brutally Honest Holiday Budget

Some think that a budget will take the fun out of shopping, but the opposite is true. One of the quickest ways to sap all the joy out of the holidays is to see a bloated balance on your credit card statement. You’ll have even less joy if you have to cancel your family vacation next summer because of holiday debt.

A budget will help you spend responsibly and make you think carefully about your gift list. You may have to get more creative to avoid overspending, such as giving the gift of your time or delivering dinner to a good friend. If you ask me, that’s the kind of holiday that creates joy.

Be sure your list is comprehensive, and include the cost of entertainment and travel in your budget. The goal is to capture every holiday expense and not just the cost of gifts.

2. Plan to Save Money

In last year’s holiday shopping survey, only 12.5% were waiting for Black Friday. In 2022? Over 38% of survey respondents plan to wait until at least the official Black Friday sales the day after Thanksgiving.

U.S. News

It’s possible that Americans are waiting longer hoping to score big deals related to the “real” Black Friday. Or they could simply be postponing the cost to have time to save more money.

Whenever you decide to get started, just say no to roaming around aimlessly in a mall or searching endlessly online. That wastes time, not to mention the cost of gas you’ll use on a search.

For each item on your list, use an app that helps you find the best prices. With some apps, such as Amazon Price Check, you can check prices by scanning a code, taking a photo, typing the item’s name or speaking its name into your phone. Other apps, such as ShopSavvy, post the latest deals for items by stores.

Plan your shopping itinerary like you’d plan a project for work or for home improvements. Almost half of survey respondents say they’ll shop both online and in stores for holiday gifts. This approach helps take advantage of sales and discounts.

Do your online shopping before heading to brick-and-mortar stores. If it looks as if you can’t find what you need online at a good price or it’s out of stock, use an app or search online to see whether you can find the item at a store. Use your phone’s GPS to choose routes between stores to maximize efficiency.

3. Use Credit Cards to Fight Inflation

Many respondents say they’ll redeem credit card rewards to help lower costs for the holidays. There are several different types of rewards that are available, including cash back, miles and much more.

Respondents were asked what type of rewards they plan to redeem to help pay for the holidays. Here are the findings:

U.S. News

If you plan ahead and know your credit cards’ rewards programs, you can use credit cards strategically to maximize your earnings.

Also, keep in mind that many rewards credit cards often come with a sign-up bonus. If you could use a new rewards credit card, consider getting one before the holidays. Use the card to buy gifts and earn rewards you can redeem next year. And when you earn the bonus, you can redeem it for a statement credit to help offset holiday expenses.

4. Get an Interest-Free Loan on a Credit Card

Instead of using credit cards with high annual percentage rates and carrying a balance, consider using a 0% purchase APR credit card. These cards come with a 0% introductory APR for a specified time period, such as 12 to 21 months.

This allows you to make a large purchase without paying interest if you pay it off during the introductory period. So you’re actually getting an interest-free short-term loan.

For example, let’s say you’re giving your teen a new PC for $700 for a holiday gift. We’ll also say that you smartly used a 0% purchase APR credit card with an 18-month introductory period.

To determine your monthly payment, divide $700 by 18. Your monthly payment: $38.89. This is much more manageable than coming up with a lump-sum payment of $700. The key is to avoid using that card for new purchases. Focus on paying off the debt before the introductory period ends, and then you can pat yourself on the back for making a choice that saved you money.

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