Author: Perez Clark

With rapid inflation and rising interest rates, more shoppers in the country now admit to relying on debit cards to purchase the bulk of their holiday items. 

This development comes as consumers aim to avoid piling more credit debt and making excessive purchases before the holidays. 

This article will look at the shifting trend in U.S. consumer shopping, stimulus packages left on American credit debt, and the increasing pressures leaving Americans with no other option than to spend economically.

Let’s jump into it!

Credit Card Debt From Holiday Gift Shopping May Not Be As Explosive This Year

A Change In Consumer Spending Behavior

According to the National Retail Federation’s survey of over 7,000 American consumers, 43%, which is the largest share since 2013, are deciding to rely mainly on debit cards to carry out their holiday purchases,

On the other hand, 38% of shoppers, the smallest share since 2015, say they’d mainly be relying on a credit card to make their purchases, 

TD Bank’s survey of over 1000 shoppers’ holiday spending behaviors indicates that the division between consumers making the bulk of their purchases with debit cards instead of credit cards could even be more significant. 

On the lower end, 33% report using credit cards, while the bulk of participants – 42% report planning to charge holiday expenses to their debit cards.

Thus far, BOA’s ( Bank Of America ) November spending stats, which report holiday-based expenses and consumers’ overall spending, show that shoppers earning below $50,000 yearly plan to dedicate most of their expenditures to debit cards.

Credit Debt On The Rise Even With Billions In Stimulus Checks

Armed with thousands of dollars in stimulus, American citizens paid off significant amounts of credit card debt and built up their savings since 2020. 

Consequently, the total amount shoppers owe to credit card companies reduced by nearly $120 Bn, from 2020 Q1 to 2021 Q1, to $770 Bn, according to the Federal Reserve Bank of New York.

However, in the most recent quarter (2022 Q2), credit card debt rose to $930 Bn, the most significant increase since 2002 and 15% higher than the previous year. 

According to the Bureau of Economic Analysis, post-tax personal savings fell by 2.4% in October from last year’s 7% and 2019’s 14%.

Nonetheless, Americans still have about $1.7 trillion worth of stimulus money stashed away in their savings, says the Fed. That represents two-thirds of the total $2.3 trillion household savings gathered from 2020 through August 2021 as part of the country’s stimulus programs.

Less Holiday Debt; More Holiday Cheers

“Many consumers don’t trust themselves to spend within their means,” says Matt Schulz, chief credit analyst at LendingTree. “As a result, more of them aren’t paying with credit cards to avoid digging their debt holes deeper.”

The holiday is infamously linked with rising consumer debt levels as people easily succumb to the urge to spend extra to find the “perfect” gifts or organize the most “memorable” family vacations. 

Millions of citizens are already battling the market conditions accompanying rising inflation and an underperforming economy. “The last thing they’d want to do is spend more money and increase their financial burdens, Schulz adds.”

Final Thoughts

Since 2021, holiday spending debt for almost one-third of Americans averaged around $1,250, according to a spending survey executed by LendingTree. 

However, this year’s upsurge in the use of debit cards indicates a positive shift in the average consumer’s spending behavior, signifying that more Americans are responsible and cautious with how they handle their finances. 

According to a recent survey, most people now reserve their credit cards for significant and unexpected expenses that may arise in the future, keeping in mind that the Federal Reserve could adjust interest rates again in its battle against the country’s rising inflation.