Shoppers say they will spend more this holiday season

With the winter holiday shopping season set to rev up, consumers are expecting to increase their spending this year. They’re also looking for ways to save and being advised to be smart if using credit cards amid higher interest rates.

Consumers expect to spend $875 on average on gifts, decorations, food and other key seasonal items, according to a National Retail Federation consumer survey conducted by Prosper Insights & Analytics. That is $42 more than consumers said they would spend in 2022. And it’s in line with the average holiday budget over the last five years, according to a media release from the federation.

Consumers plan to be cost conscious this year, with 62% reporting sales and promotions are more important to them this season than last season.

The survey also found:

• 48% plan to shop at discount stores

• 36% are cutting back in other areas to cover the cost of holiday items

• 30% are purchasing gifts for fewer people

• 27% are buying less for themselves.

When shopping, consumers should avoid using credit cards if they can’t pay off those purchases quickly, advises Chuck Bell, financial policy advocate with Consumer Reports. Last year, 35% of U.S. consumers took on holiday debt, according to LendingTree’s 2022 annual holiday debt survey.

The average amount was $1,549, up 24% from 2021, and the highest in the eight-year history of the survey. Nearly two-thirds, 63%, said they hadn’t planned to take on holiday debt, and 37% expected it to take them five months to pay it off.

The average credit card interest rate at that time was 18.5%, and now the average is around 25%, Bell said. Retail credit card interest rates are even higher. The average is a whopping 28.9% according to Bankrate.

“Consumers will spend a lot more money if they finance their purchase with credit cards,” Bell warned.

Among common mistakes people make when using credit cards during the holidays is not factoring in the unexpected, he noted. They might have emergency expenses arise. For example, if your car breaks down or you need to buy a new appliance, you could get in over your head because you may need to use your credit card for other reasons, he said.

“You want to make sure to protect your own financial standing and to also be prepared appropriately for any emergency that may come along,” he stressed. “So don’t go out on a big spending spree without considering that you may experience other shocks to your household budget. Putting yourself in debt is not a good present for your loved ones.”

His advice: use cash or debit cards for holiday purchases, and if you are going to use credit, have a plan for how you’re going to pay it off.

“You don’t want to be paying off bills in May or June,” Bell said. “You want to be done in just a few months.”

Also, be aware of what your annual percentage rate is, and call your credit card issuer to see if your interest rate can be lowered, he said.

Shoppers interviewed at Orland Square mall in Orland Park Sunday said they don’t plan to charge holiday gifts.

“I will use my debit card,” said Carolyn Lightle. “I don’t plan on using credit. I don’t want the bill.”

She said higher interest rates are a factor in her avoiding credit card use.

Lightle has already begun her holiday shopping, and as for her spending plans, she said she expects to spend about the same as last year.

Jeffrey Chapman, who was at the mall with his daughter, Justice Chapman, and her 6-year-old twin daughters Madison Gardner and McKenzie Gardner, hasn’t started his shopping yet. He usually begins in December, he said. He plans to use both cash and credit when shopping for holiday gifts. But he isn’t concerned about higher credit card interest rates affecting his finances.

“I don’t carry a balance,” he explained. “I pay the balance off before the interest is accrued.”

He and his wife plan to spend less this holiday season, he said.

Justice Chapman plans to spend more this year and has already started her Christmas shopping, she said. She’s bought one gift so far.

“I definitely plan to spend more because of the gifts that I plan to buy,” she said. “I plan to buy bigger gifts. I don’t plan to buy toys this year. I plan to buy a game system and a TV, much more.”

And she will be using cash.

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“I don’t have credit cards,” she said. “I kind of want to avoid credit cards.”

She said she has done fine without them and hopes that will remain the case.

According to the federation, 92% of survey respondents said they plan to celebrate Christmas, Hanukkah or Kwanzaa this year. Most consumers, 58%, plan to shop online, and 49% plan to shop at department stores.

The gifts consumers want most to receive this year are gift cards, followed by clothing or accessories, books and other media, personal care products and electronics.

Before making those or any other purchases, start the holiday shopping season off with a clear plan, said Bell.

“People often lose track of how much they will spend over the period,” he said. “If you want to avoid going into debt, the best thing to do is to make a budget for holiday gifts and spending and stick to it.”

Francine Knowles is a freelance columnist for the Daily Southtown