Holiday 2024: One-Fifth of Shoppers Plan to Take on Debt
Key Takeaways
One-fifth (20%) of U.S. adults said they’ll have to go into debt to pay for holiday celebrations and obligations.
Gifts, holiday food and beverages, and celebrations are the most affordable holiday expenses, and also shoppers’ top priorities. Travel costs are more likely to break the bank.
Financially stressed holiday shoppers will look to debt, including buy now, pay later loans, to stretch their holiday budgets.
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Lower inflation and interest rates are good news for shoppers, but spending is slowing down heading into the holiday season. A slowdown in consumer spending this summer could signal a slower holiday season overall, though the impact of lower interest rates on consumer shopping is yet to be seen. A soft landing in addition to holiday enthusiasm can buoy retail sales this season.
More than half (53%) of U.S. consumers anticipate spending about the same this holiday season as they did last year, while 30% plan to spend less. Achieving those goals will be a challenge. Inflation may have slowed but prices are still higher than they were a year ago. Shoppers will either have to find bargains or reduce their overall consumption to stick to their holiday budgets.
Most shoppers will trade off day-to-day purchases or some holiday expenses to balance their budgets
More than half (57%) of consumers say they already have money saved or are currently saving up for holiday expenses, but holiday debt is seemingly inevitable for many shoppers. One-fifth (20%) of U.S. adults said they’ll have to go into debt to pay for holiday celebrations and obligations. More commonly, shoppers will cut back on some of their day-to-day expenses in order to make room in their household budgets for gifts and other holiday purchases.
Holiday shoppers will trade off their typical expenses to afford the holidays
There are of course two sides to the affordability coin: Those who have the means to afford to purchase as much as they want for gifts and consumption are represented in the high-income cohort. Then there are those who say they can easily afford their holiday expenses because they have fewer expenses that don’t exceed their means: This is more common among the baby boomer demographic, who consume less overall.
Gifts, celebrations and holiday food and beverages are most affordable for celebrants
Shoppers will take a close eye to their holiday expenses and make tough decisions to forego what they can’t afford. Gifts, celebrations and holiday food and beverages are deemed most affordable: more respondents said they can afford those costs than could not. Among the respondents who indicated that they can afford each holiday expense, those common holiday purchases are also their top priority.
Holiday shoppers’ most affordable expenses are also their top priorities
Travel expenses present a much larger affordability challenge. Most respondents said they could not afford to go far from home or pay for lodging at their destination. Regional trips, more likely taken by car, are more in bounds, especially when travelers can stay with family.
Financial worries drive more usage of buy now, pay later loans
Holiday shoppers who express negative sentiment (i.e., worry, frustration, and helplessness) about their finances for this holiday season are much more likely to report using buy now, pay later loans (31% versus 19% of those who do not have negative sentiment). BNPL is most often used to pay for expensive gifts, which shoppers may need to take a few months to pay off. It’s not all young, lower income consumers though: Wealthier consumers are using BNPL loans at higher rates as credit card interest rates have climbed to astronomical levels.
Non-traditional payment methods are more popular among those experiencing financial strain
Money transfer apps like Venmo — which some consumers treat as checking accounts — are also more commonly used among those expressing concerns about their holiday expenses. These more novel payment methods are attractive to shoppers looking to stretch their dollars farther.
Usage rates of more common payment methods like debit cards, credit cards and cash are even across those feeling more confident about their finances and those feeling worried. Retailers offering BNPL and accepting payments from apps like Paypal and Venmo are well-positioned to capture this audience.
