Debt the halls: 65% of shoppers report financial stress leading up to the holidays

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Finding the perfect gift on a budget can feel impossible. You want to show your loved ones you care but can’t afford to spend too much. Whether you plan to wait out in the cold for Black Friday deals or find yourself scrambling last-minute the night before, holiday shopping is a stressful time for the average American.

Tack on a seemingly endless cost-of-living crisis and widespread credit card debt, and you have a holiday season where economic uncertainty brings an extra chill to the air.

Retailers have taken notice. Ahead of the holiday season, companies like Target and Walmart have announced they’re cutting prices on thousands of items, hoping better deals will attract customers who are feeling strapped for cash.

To understand how shoppers are managing their money through this financially stressful season, ConsumerAffairs surveyed 1,000 Americans about their plans for holiday spending this year.


Key insights

Nearly two-thirds (65%) of shoppers report feeling stressed about finances this holiday season.

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About 75% of shoppers intend to spend the same amount of money or more on holiday shopping compared with last year.

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Nearly 30% of shoppers say they feel pressure to spend more on gifts than they can afford.

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Around 27% of shoppers went into debt to pay for holiday shopping last year; 8% are still paying it off.

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Almost 4 in 10 shoppers say they plan to shop during Black Friday or Cyber Monday to save money.

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Of the 20% of shoppers who plan to spend less on holiday gifts this year, 1 in 3 cite economic uncertainty and inflation as reasons.

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14% of shoppers have taken on a side hustle or gig work to help pay for holiday expenses.

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Financial stress dampens holiday cheer for many Americans

The higher cost of living in recent years has many Americans feeling left out in the cold. According to our survey, 65% of shoppers are feeling financially stressed this season.

Outside pressure may be contributing to the stress. Almost 30% of shoppers say they feel pressured to spend more on gifts than they can afford. To compensate, some shoppers (14%) are taking on a side hustle or gig work to cover this year’s holiday expenses.

Stephen Gray, an associate professor of finance at Western Illinois University, suggests shopping “within the parameters of a comprehensive budget” for the holiday months. This includes not just gifts, but other season-specific items, like decorations and travel.

“As the shopping season progresses, track all holiday purchases to ensure accountability with your budget,” he said.

From Black Friday deals to fewer gifts: How shoppers are managing tight holiday budgets

Shoppers trying to save money on their holiday shopping this year are turning to a wide array of strategies, our survey found.

One-third of shoppers say holiday shopping will strain their budgets. To save money, a sizable number (38%) say they plan to shop during Black Friday and Cyber Monday. To spread out the cost, 27% of shoppers plan to start holiday shopping earlier than usual.

27% of shoppers went into debt last year — will 2024 be different?

Shoppers are bringing home debt for the holidays. Many still want to give their friends and loved ones the best holiday season possible, so throwing finances into the red has become increasingly commonplace.

Of those shoppers who went into debt during the holidays last year (27%), about 30% are still paying it off, potentially dealing with consequences such as compound interest and higher annual percentage rates (APRs).

According to our survey results, the trend of going into debt for holiday shopping will continue. Nearly 19% of shoppers expect they’ll go into debt this year to fund holiday shopping. About 2 in 10 plan to use credit cards.

Half that number, 10%, say they plan to use a buy-now-pay-later (BNPL) service. Over 30% of shoppers say they’ve used BNPL services in the past, including Klarna, Affirm or PayPal. Take these at face value and they seem like the perfect solution: You can buy something expensive without money upfront and then pay for it bit by bit. But don’t forget that with BNPL, you’re taking out a loan.

Holiday debt adds to a U.S. household debt problem

For many Americans, dealing with debt is a fact of life. Total household debt rose by $109 billion in the second quarter of 2024, reaching $17.8 trillion, according to the latest data from the Federal Reserve Bank of New York. Credit card debt was up $27 billion, to $1.14 trillion.

Americans are not only having to borrow to buy holiday gifts — they are also financing the most basic of needs. An analysis by the Urban Institute found that in 2023, 27% of adults used a credit card to buy groceries and paid less than the full balance on the card due date, a practice that over time lowers your credit score and makes it harder to borrow in the future — even if you want to take out a debt consolidation loan to pay off multiple high-interest credit cards.

Although credit card debt is a nationwide issue, the amount varies from state to state. In many cases, states with higher average credit card balances have higher costs of living. We sourced data from the Federal Reserve Bank of New York to compare credit card debt per capita across states.

Washington, D.C., residents have the highest credit card debt, with an average balance of $5,190, 31% more than the national average of $3,950. Mississippians have the least credit card debt, at $2,780 per person.

Tips to save money and stay debt-free this holiday season

Those looking to shrug off the stress of holiday shopping can take different steps to save themselves money and migraines. Here are a few tips to keep your finances in check these next few months.

Set a strict budget and stick to it.
This step may seem obvious. However, taking the time to figure out how much money you have to spend and whom you need to buy gifts for can make things easier. When you know what you can afford, it’s easier to stay within your financial limits.

Make a list (and check it twice).
After setting that budget, make a list. Have a general idea of what you’re buying for each person before you walk into a store or open that Amazon tab. You may find yourself enticed by the deals you see while shopping, but sticking to your list can help keep you from overspending.

Take advantage of sales and discounts.
The easiest way to save money is to keep track of deals on items you’d like to buy. Some of the best deals are found during Black Friday and Cyber Money. You can use certain websites and services that track deals and offer coupons, like Honey.

Use cash or debit instead of credit cards.
Avoid any trouble with credit by switching to debit. Using cash or a debit card can help avoid racking up debt, and it allows you to spend based on what money you physically have instead of budgeting based on money you’ll eventually need to pay off. If you do decide to use credit, make sure to only charge amounts you know you can pay back in full to avoid any interest fees.

Avoid buy-now-pay-later temptations.
BNPL may seem tempting, but there are real risks — especially for those with preexisting debt they’re still paying off. If you do use BNPL, ensure you can afford to pay each installment on time to avoid any fees. Limit BNPL to one item at a time to help manage expenses.

Consider DIY or experience-based gifts.
Personalized, handmade gifts may cost less and often mean more to those receiving them. You can also give an experience rather than a physical item, like a trip to a local spot your friend keeps recommending; the memories will mean more long-term than a shiny new product.

Finally, if you do overspend, turn over a “new wreath” for next year.
Just because you went over budget this holiday season doesn’t mean you have to next year. “The first step to take in managing the guilt associated with overspending on gifts is to acknowledge overspending and then commit to establishing a budget for next season as soon as possible,” Gray from WIU said. He recommends two strategies once you have a budget: Develop a plan to save throughout the year before the shopping season, and identify an “accountability partner” to help you monitor spending once the season starts.

Methodology

Using Pollfish, ConsumerAffairs surveyed 1,000 Americans on Oct. 22, 2024, who plan on shopping for holiday gifts this year. We used stratification to ensure the results reflect the broader population.

Reference policy

We love it when people share our findings! If you do, please link back to our original article to credit our research.


Article Sources

ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:

  1. Federal Reserve Bank of New York, “Household Debt and Credit Report (Q2 2024).” Accessed Oct. 30, 2024.
  2. Federal Reserve Bank of New York, “Data Bank.” Accessed Oct. 30, 2024.
  3. Urban Institute, “Many Families Are Taking on Debt to Pay for Groceries.” Accessed Oct. 30, 2024.

Figures

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Journal of Consumer Research