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.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
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|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
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|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
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|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|