Consumers spent a record $9.12 billion online shopping during Black Friday, while consumers spent another record $11.3 billion on Cyber Monday, according to the latest data from Adobe. So far this November, consumers have spent $107.7 billion online overall, up nearly 10% from last year.
However, nearly 60% of Americans were living paycheck to paycheck as the month wore on.
“Shoppers continue to spend despite inflation and economic headwinds,” said Tom McGee, president and CEO of ICSC, the retail real estate industry’s largest trade association.
With rising prices continuing to affect the financial situation of most households, more shoppers are relying heavily on credit cards and flexible payment plans to make their purchases.
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But with APRs close to 20%, or even 30% on some retail cards, it can take years to pay off credit card debt.
While buy now, pay later often doesn’t promise interest, studies have also shown that buying on installments can encourage consumers to spend more than they can afford.
Last year, more than half of shoppers made purchases with BNPL they were unable to repay, according to a survey by Oxygen, an online-only bank.
This year, Americans are on track to get deeper into debt. However, experts say it’s not too late to avoid the same financial pitfalls this season. Here’s how.
How to avoid accumulating holiday debt
Black Friday shoppers wait to enter a Nike store at Opry Mills Mall in Nashville, Tennessee, on November 25, 2022.
Seth Herald | AFP | Getty Images
1. Cut your credit card
If your credit card balance already seems unmanageable, “it’s time to cut back and focus on paying it off,” said Lori Gross, a financial advisor at Outlook Financial Center in Troy, Ohio.
“Use the cash from this point on if you still have to shop during the holiday season.”
2. Come up with a strategy
Add what you bought now and budget for the rest of the season, Gross said. “It should be a lot less if you’ve already spent too much.”
I suggested sharing your strategy with a family member or friend so they can help you stay on track with your new budget and keep you from getting too deep into debt. There are also free online apps and resources that can help get your finances in order for the holiday season.
3. Create a holiday fund
It’s never too late to start a holiday fund. “Adopt a strategy now and hold yourself accountable,” said Michael Sheppard, group vice president at Minneapolis-based financial services firm Thrivent.
Advise challenging yourself to save money each week. “Making routine transfers from spending accounts to a holiday savings account meant for future shopping can really add up.”
4. Connect with your family and friends
If you want to cut back on your celebrations, Sheppard advised, start those conversations with your loved ones now. “Instead of exchanging gifts, maybe there is a holiday event, concert, or theater show that your family can attend together,” he said. “Make shared experience a cost-effective memory.”
Also consider a charitable donation in lieu of gifts. Making time to volunteer can be especially helpful, Sheppard said.
“This can help you stay grounded on what matters and make it clear what you want to achieve during the holiday season.”
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