2 in 5 Holiday Shoppers Say Their Debt Will Stifle This Year’s Spending

holiday-spending-survey

The holiday season can quickly get expensive – the average amount shoppers expect to spend on 2016 holiday expenses topped $936, according to The National Retail Federation. But spending that much on the holidays is sure to pinch budgets, as it’s equal to about 20 percent of gross monthly income for the 2015 median household income of $56,500.

This is even more true for holiday spenders with debt, according to our latest survey.

Household debt definitely puts a damper on shoppers’ holiday budgets. Among respondents to the survey, two in five say debt will limit their 2016 holiday spending. Additionally, a third indicated that student loans, specifically, will impact their holiday expenses this year.

On the other hand, many shoppers are willing to cut back on holiday spending, avoid credit cards, and make sacrifices to ease financial strain. Here’s a look at what holiday shoppers had to say about their debts and spending this holiday season.

More than 40 percent of holiday shoppers are spending less due to debt

With monthly payments to make towards a mortgage, credit cards, student loans, or car loans, shoppers with debt have less cash flow available for holiday spending. In fact, 42.6 percent of respondents in our survey said household debt will limit holiday spending this year.

Among those who said their debt is negatively impacting their finances, a mortgage was most commonly cited as the biggest financial burden.

  • 33 percent said they are most burdened by their mortgages
  • 25 percent said credit cards are their most burdensome debt
  • 23 percent said student loans are their biggest financial burden
  • 19 percent said their car payment is their biggest burden

A mortgage payment is typically the largest debt payment a household would make each month. So it makes sense that many respondents feel their house payment puts the biggest limit on how much they can afford to spend.

However, student loans and credit cards are also a big source of stress for holiday shoppers. Nearly half (48 percent) of shoppers with debt pointed to these unsecured debts as their biggest burdens this holidays season.

Student debts limit spending on gifts and travel

In another question, we asked respondents how their student loans would affect their holiday spending. About two-thirds indicated they either do not have student loans or their holiday spending is not impacted by student loan debt.

The other third of respondents (33.5 percent) anticipate that student loan debt will affect their spending. Among this group, student loans most commonly impact spending on holiday gifts, presumably lowering what they can afford to buy. Travel is the other holiday expense most commonly impacted by student loans, with two out of five saying their educational debt will limit their ability to travel over the holidays.

Here’s how student loans will affect the different categories of spending named in the survey:

  • 61 percent said their student loan debt will affect spending on gifts
  • 39 percent said holiday travel plans will be affected by student loans
  • 28 percent said student loans will affect what they can donate to charities
  • 28 percent said student loans will affect spending on holiday gatherings

Half of shoppers would sacrifice to afford holiday expenses

Just over half of respondents said they’d be willing to make at least one of five financial sacrifices named in the survey if they couldn’t afford their holiday expenses this year.

This willingness to make sacrifices shows that many shoppers are considering the financial impact of the holidays. And they’re open to doing more to mitigate them – even skipping the holidays altogether.

Of the half of respondents willing to sacrifice to afford holiday expenses, here is how many say they would take each measure:

  • 42 percent would get a side job or work overtime
  • 30 percent would give up all gifts for the year
  • 27 percent would skip celebrating the holidays this year
  • 10 percent would borrow money from family or friends
  • 8 percent would pull money out or retirement savings

Of the possible responses, the least common are those with the biggest potential financial downside: borrowing from friends or pulling money out of a retirement account. But working overtime or getting a side job can be a smart way to generate extra income to cover holiday expenses.

A third of credit card spenders will carry new holiday debt into 2017

Shoppers are willing to make a lot of sacrifices to avoid financial disaster over the holidays, but skipping the plastic isn’t exactly one of them. Just under half (46 percent) said they are planning to use a credit card for holiday spending. The majority (54 percent) still plan to avoid paying with credit, however.

Among those charging to credit cards, more than two-thirds (68 percent) stated they plan to pay off the balance right away. Doing this can be a smart move to take advantage of credit card rewards or cashback offers, while avoiding interest charges that will add to holiday costs.

But the other third (32 percent) of credit card user already expect to carry a balance for more than 30 days. This will trigger interest charges, which will add to their holiday expenses. In fact, carrying a $936 balance (equal to the average holiday spending planned) for just one month will add $15.60 in interest to holiday costs. It will also put these spenders in the red from the very start of the New Year.

Additionally, most shoppers (55 percent) charging to their credit cards expect to add more than $500 to their balances due to holiday shopping. And one in 10 people shopping with a credit card plan to rack up over $2,500 in charges for the holidays.

  • 45 percent expect to charge less than $500 to credit cards
  • 29 percent plan to charge $501-$1,000 to credit cards
  • 16 percent plan to charge $1,001-$2,500 to credit cards
  • 10 percent expect they’ll charge more than $2,500 to credit cards

Overall, many respondents said they will be spending less due to debt and would be making sacrifices to afford holiday expenses. This survey reveals that household debt definitely has a limiting effect on spending behaviors, especially student debt. But it also proves that many consumers are willing to make sacrifices and spend less to offset financial burdens.

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1 Includes AutoPay discount. Important Disclosures for SoFi.

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SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.19% APR to 11.32% APR (with AutoPay). SoFi rate ranges are current as of July 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 4.99% APR assumes current 1-month LIBOR rate of 1.22% plus 3.95% margin minus 0.25% autopay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
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