6 Ways Americans Plan to Pay for Holiday Gifts This Year News ad

As Americans look forward to the holidays, one less joyful issue often arises: cost. To manage holiday spending this year, people plan to buy fewer gifts, shop at discount stores and use credit card rewards, among other strategies.

As families prepare for the additional expenses associated with the holiday season, concerns about tight budgets and the risk of overspending are prevalent. Consumers say they plan to spend just over $900 per person on holiday gifts, decorations and food this year, up $25 from 2023, according to a new survey from the National Retail Foundation.

Meanwhile, nearly half of adults say they live paycheck to paycheck and 55% are concerned about the rising cost of vacations, according to a separate survey released Thursday by Thrivent.

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Companies like Target are trying to meet the needs of holiday-saving shoppers. The mega-retailer just slashed prices on 2,000 items and is offering a larger selection of gifts under $20 this season. Online retailers with competitive prices and discount stores are expected to see an increase in overall holiday spending, while households also continue to turn to new financing options to fund gifts for their loved ones.

Here’s how Americans say they plan to afford their vacation:

Shopping at discount stores

Nearly 6 in 10 consumers expect to do more holiday shopping at discount stores compared to last year, according to a new study from Bank of America.

“This way, they’ll get more for their money, and it will allow them to cover more of their holiday shopping without sacrificing the gifts they want to receive,” said Mary Hines Drosh, the company’s head of banking products. in the research presentation.

Bank customers plan to shop at various types of discount retailers, including wholesalers and big box stores (54%), dollar stores (39%), discount department stores (37%) and shopping malls (21%).

Buy fewer or less expensive gifts

Cutting back on gifts is the easiest way to save money, but it’s always a tough decision for families, especially those with children. Thrivent’s research shows that many households plan to put their finances first this year, with 33% of respondents saying they will buy cheaper gifts and 31% saying they will be buying fewer gifts.

Buy now, pay later

A September report from Adobe Analytics predicted that Buy Now, Pay Later (BNPL) spending will increase 11.4% compared to last holiday season.

Payment options through third-party services like Klarna and Affirm can give consumers extra time to put together funds for a purchase, and you can usually avoid most fees if you pay in four installments, two weeks apart. However, using buy now, pay later for longer-term financing can quickly become expensive, and relying too heavily on BNPL can damage your credit score.

Before using any BNPL service, make sure you know how much interest you’ll owe and consider how it might affect your overall credit.

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Saving finds and DIY gifts

While some holiday gift givers prefer the convenience of gift cards or cash, you can also give a thoughtful gift without spending a lot of money.

Drosh suggests making homemade gifts like photo albums, and a report from Thrivent notes that many Gen Zers plan to shop at thrift stores for affordable (and eco-friendly) gifts. And it’s not just brick-and-mortar stores: Online consignment stores with apps like Depop and Poshmark have gained popularity among younger generations due to their convenience and large selection of curated clothing.

Earning rewards with a credit card

According to Bank of America, 40% of its customers intend to use credit cards to pay for all or part of their holiday purchases. The bank says it expects to see an increase in the number of rewards paid out at Amazon and PayPal checkouts.

Using credit card rewards to pay for holiday gifts can be an effective strategy for reducing your card balance, but remember that your rewards are valuable. You should always compare available redemption options to see which one will increase your hard-earned points the most.

Borrowing

While many of the above strategies can help consumers budget for the holidays, taking on debt is a last resort. Research from Morning Consult shows that one in five shoppers expect to take on debt this season.

It often takes more than a year to pay off holiday credit card debt, meaning overspending now could ruin next year’s celebrations.

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