Consumers Stressed by Holiday Debt
Each year, many Americans rack up additional credit card debt over the holidays. A new survey by Experian shows that 60% of Americans admit holiday shopping puts a strain on their finances, and 52% are stressed about finances during the holidays.
The survey also provides some insights into why consumers feel obligated to spend so much.
- Consumers don’t want to look cheap to their friends and relatives. In fact, 35% of the survey respondents said they wanted to look generous, while only 4% said they wouldn’t mind looking stingy. This leads shoppers to spend more than they should. In fact, 41% said they feel “obligated” to spend more than they can afford.
- When shopping for gifts, consumers are more concerned with finding the “right” gift than staying within their budgets. In fact, 20% of consumers said picking the right gift was their biggest holiday worry, and only 14% were concerned about sticking to their budgets.
- Many shoppers (53%) aren’t even setting a budget, and even when shoppers do plan ahead, they are overspending. 38% of the survey respondents said they spent more than expected.
Once shoppers do go over budget, they turn to their credit cards to make up the difference. During this past holiday season, only half of the survey respondents had saved the money they needed for holiday shopping. Nearly a quarter of the respondents said they planned on charging purchases to their credit cards.
This overspending has long-term negative effects for shoppers, as increased debt lowers credit scores. In fact, 18% of Millennials and 10% of consumers overall said holiday shopping has negatively affected their credit score.
The good news is that consumers recognize the problem and plan on getting off to a good start in 2016. Some of the top New Year’s resolutions were paying off a credit card (28%), paying the full credit card balance each month (25%) and paying credit card debt on time (21%).