Spending

41% of shoppers are willing to go into debt this holiday season, and that's likely an undercount, expert says

"If you already have credit card debt, and you're buying more stuff, you are adding to your debt."

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If you've been shopping at the mall lately, you've likely already heard a Christmas carol or two over the loudspeakers, and commercials touting Black Friday sales are already filling the airwaves.

Those early November primers for the holiday shopping season aren't falling on deaf ears, survey results from CreditCards.com show. More than 2 in 5 holiday shoppers, 41%, are willing to go into debt to fund their holiday shopping, according to the survey.

That number is even higher for consumers who are entering the holiday season already in debt: More than half, 60%, of those carrying credit card balances month to month say they're willing to go deeper into the red to fund their holiday purchases.

Both those numbers are likely undercounts: People are fed up with the pandemic and more willing to spend their way out of their feelings, says Ted Rossman, senior credit card analyst at CreditCards.com. When that happens, people tend to part with more than they realize.

"Sometimes it doesn't feel like as much as it is. But I think that especially when you throw inflation in there, there are some hidden costs," Rossman says. "I think this year more than usual, there could be that January hangover of like, 'Whoa, what happened?'"

I think this year more than usual, there could be that January hangover of like, 'Whoa, what happened?'
Ted Rossman
Senior credit card analyst, CreditCards.com

While consumer spending is good for the economy, Rossman hopes credit card spenders will be mindful not to get too much further into debt, considering the high interest rates that credit cards carry. "I don't want to tell people to be a monk and don't spend any money," he says. "But, frankly, if you already have credit card debt, and you're buying more stuff, you are adding to your debt."

Even a modest $1,000 credit card bill can be a drag on people's budgets if they don't pay it off quickly, Rossman explains. "If you only make minimum payments at 16% [interest], you're going to be in debt for about three years, and you'll pay about $270 in interest."

Holiday sales will likely break records this December

Even for people who don't plan on going overboard this holiday shopping season — 48% want to spend "about the same" amount this year as they have in the past, according to the survey — current economic conditions are going to make that tough, Rossman says.

"There's a lot of pent-up demand," he says. "My expectation is that holiday sales will be up, and it seems like everybody else is saying the same thing."

He points to data from last year, which shows that despite pandemic fears and widespread shutdown orders, holiday retail sales still grew more than 8% between 2019 and 2020, according to the National Retail Federation.

This year, the NRF is forecasting that sales will be as much as 10.5% higher this December than they were in 2020, making for a record-breaking holiday retail season. That combined with historically high inflation on goods due to supply-chain hiccups and widespread shortages means people will likely be spending a lot more this holiday just to get the same amount of stuff that they've gotten in previous years.

Despite those headwinds and overall low morale about the economy, Americans have continued spending a lot of money on goods in recent months. "There really is this disconnect" between consumer sentiment and consumer spending, Rossman says. Sentiment has "really been in the toilet lately, yet people continue to spend. The stock market continues to go up. Retail sales seem to be growing considerably month after month."

Prices will be higher this year, so plan ahead

Even if you're one of the 21% of Americans who plans to taper their spending during the holiday season, you're still likely to face some sticker shock. Black Friday discounts aren't likely to solve the problem, either. In fact, experts recommend not waiting for Black Friday this year: Inventories are so low that stores will likely sell out of items without having to put them on sale.

Once you've accepted that you may have to pay full price for many items on your list, tackle the next challenge, which is actually getting those items on time, says Julie Ramhold, consumer analyst with DealNews.com. Her advice? Order now. "The sooner you order, the sooner you can expect your items to arrive," she says. "While this might not take care of delays entirely, it will give you more padding so that hopefully your items can arrive sooner rather than later."

VIDEO3:5203:52
How to save shopping online during the holidays

Video by Mariam Abdallah

This might be a great year to consider gifting experiences, like concert tickets or even plane tickets for vacations, Rossman says, especially since they were off-limits for so many people last year. You might even be able to use reward points to pay for them.

"I think this is a theme this year: that experiential gifts will be back," Rossman says. "Maybe cash in some credit card rewards. You can often redeem these for gift cards or cash back or even sometimes for event tickets, travel, and stuff like that."

One thing consumers should watch out for are "buy now, pay later" programs which have become increasingly popular offerings from online retailers, Rossman says. Those purchases can add up quickly, and the bill comes due just as fast.

"There's a little bit of a hidden toll there," Rossman says. "It's not as harmful as making minimum payments at 16% forever and ever, but it's still debt."

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