The holiday season often brings joy and celebration, but for many Americans, it also comes with financial challenges. A recent survey conducted by LendingTree and QuestionPro revealed that over a third of Americans took on debt this holiday season to make seasonal purchases like gifts. Notably, only 44% of those who incurred debt had planned to do so.

Consumers took on an average debt of $1,181 this holiday season, up from $1,028 in 2023. The majority of shoppers relied on credit cards (65%), store cards (24%), and buy now, pay later services (21%) to fund their purchases. A significant portion (60%) of those who took on debt reported feeling stressed about it.

Millennials led the way, with 42% taking on debt, followed by Gen X at 37%, Gen Z at 34%, and baby boomers at 29%.

Insights

While holiday spending continues to stretch budgets, this year’s average debt was lower than the $1,550 recorded in 2022, which marked the highest level in the 10-year history of the LendingTree survey. Despite this slight improvement, the financial strain on consumers remains evident.

Higher earners ($100,000+) incurred the most debt this holiday season, averaging $1,429, while those earning between $30,000 and $50,000 took on the least, at $909. Parents with young children were most likely (48%) to incur holiday debt.

Nearly three-quarters of respondents participated in holiday gift-giving, yet 42% of consumers regretted their spending. More than 20% of those who took on debt expect it to take five months or longer to pay off.

The Impact of Inflation

“Inflation is still a big deal in this country, and it’s having a huge impact on people’s finances, including their holiday spending,” said Matt Schulz, LendingTree’s chief credit analyst. “While people make lots of sacrifices to deal with higher prices, many may not want to sacrifice at the holidays, so debts continue to rise.”

Making minimum payments is a common issue, but Schulz cautioned against it, stating, “Taking forever to pay off holiday debt means that you’re unable to put as much toward other financial goals such as building an emergency fund or saving for retirement or a mortgage down payment. In more extreme cases, it may mean you’re less able to pay essential bills or keep food on the table.”

Why it Matters

For catalogers, understanding these financial trends is crucial. By tailoring marketing strategies and product offerings to address consumers’ financial challenges, businesses can build stronger relationships with their customers. Offering flexible payment options and promoting budget-friendly items can foster loyalty and trust.

Source: https://www.retaildive.com/news/shoppers-acquire-holiday-season-debt/736521/