Key learning points
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Inflation isn’t expected to hit the Fed’s 2 percent target until 2025, making holiday shopping more challenging this year.
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To cope with rising costs, some are shopping for cheaper brands, trimming their budgets and postponing the purchase of expensive items.
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Timing your purchases, layouts and buy now, pay later plans are among some options to make your holiday gifting more affordable without using credit cards.
Inflation is easing, but remains persistent – a trend that economists predict will continue until 2025. The overall increase in the cost of living, along with rising interest rates and the resumption of student loan payments, is causing Americans to reconsider their holiday purchases. Cutting budgets, switching to cheaper brands and putting off big purchases are some of the tactics consumers are using to keep holiday spending at bay.
38% of those buying gifts in 2023 will spend less than last year
A recent report from The Harris Poll revealed that as many as 65 percent of Americans are feeling “anxious and stressed” as the holidays approach due to inflation. As a result, more than a third (38 percent) of those who bought Christmas presents last year plan to cut back on consumption this season.
But while inflation and the overall increase in the cost of living are the main drivers behind this change in sentiment, the resumption of student loan payments this year is also playing a big role in spending.
Among those who reduce their holiday gifts, most will cut less than $500. However, millennials – one of the generations most plagued by student debt – will make bigger cuts than any other generation, potentially cutting their spending by as much as $999.
Gen Zers, on the other hand, stand out for smaller cuts than any other generation, with 74 percent cutting their holiday spending by less than $250.
But despite the bigger cuts among Millennials, Generation X is the generation most likely to reduce their giving this year (45 percent), followed by both Millennials and Boomers (36 percent). Yet all is not bleak, as many consumers (22 percent) are focused on prioritizing paying off credit card debt in hopes of starting the year on a better financial footing.
See related: Which generation has the most student debt?
Ways to make holiday gifts more affordable without racking up credit card debt
As a large portion of consumers prioritize paying off debt this holiday season, 35 percent are switching to cheaper brands to cut costs, while 31 percent are postponing major purchases. Apart from that, here are a few alternatives you can explore to make giving easier on your wallet, without credit cards:
- Time your purchases: One way to save money on holiday purchases is to time your purchases for locked-in deals. This is a good idea for higher-priced items, as retailers tend to tighten up the offer during the holiday season or introduce “extras” to encourage consumers to spend.
- Layaways: A popular choice ten years ago, layaways are making a comeback. Major retailers like Amazon and Best Buy offer this option, which usually requires you to deduct a small percentage of your purchase (15 to 20 percent) and gives you a few weeks to pay it off in full without incurring debt.
- Buy now, pay later (BNPL): BNPLs typically allow you to split your payments into four interest-free installments due every other week.
- Holiday loans: Holiday loans, a type of personal loan, are offered throughout the season by financial institutions, such as banks, credit unions and online lenders, with a fixed interest rate and repayment term. These can be a good alternative to credit cards as their interest rates are usually much lower, plus you get a lump sum instead of having to spend money as you go, so you can stay within a budget.