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- Inflation isn't expected to hit the Fed's 2 percent target until 2025, making holiday shopping this year more challenging.
- To cope with rising costs some are shopping for less expensive brands, shaving off their budgets and delaying purchasing big-ticket items.
- Timing your purchases, layaways and buy now, pay later plans are among some options to make your holiday gifting more affordable without using credit cards.
Inflation has been subsiding, but is persistent — a trend that will go on until 2025, according to economists. The overall increase in cost of living, along with rising rates and student loan payment resumption is making Americans rethink their holiday shopping. Slashing budgets, switching to cheaper brands and delaying big purchases are some of the tactics employed by consumers to keep holiday spending at bay.
38% of those buying gifts in 2023 will be spending less compared to last year
A recent report by The Harris Poll revealed that as much as 65 percent of Americans feel “anxious and stressed” as we approach the holiday season due to inflation. As a result, over a third (38 percent) of those who bought holiday gifts last year, are planning on scaling back this season.
But although inflation and the overall rise in the cost of living are the key drivers in this change of sentiment, student loan payment resumption is also playing a big role in this year’s spending.
Among those reducing their holiday gifting, most will make cuts of less than $500. However, millennials — one of the generations most riddled with student loan debt — will make larger cuts than any other generation, shaving off their spending by as much as $999.
Gen Zers, on the other hand, stand out for smaller cuts than any other generation, with 74 percent reducing their holiday spending by less than $250.
But despite millennials’ larger cuts, Gen X is the generation that will reduce their gifting the most (45 percent) this year, followed by both millennials and Boomers (36 percent). However, not all is grim, as many consumers (22 percent) are focused on prioritizing paying off credit card debt in hopes of starting the year in better financial footing.
Ways to make holiday gifting more affordable without racking up credit card debt
As a good share of consumers are prioritizing getting out of debt this holiday season, 35 percent are switching to less expensive brands to save on costs, while 31 percent are delaying big purchases. Aside from that, here are a few alternatives you can explore to make gifting easier on your wallet, without credit cards:
- Time your purchases: One way to save money on holiday purchases is to time your purchases to lock-in offers. This is a good idea for more expensive items, as retailers tend to sweeten the deal throughout the holidays or throw in “extras” to encourage consumers to spend.
- Layaways: A popular choice a decade back, layaways are making a comeback. Big retailers like Amazon and Best Buy are offering this option, which usually requires a small percentage of your purchase down (15 to 20 percent) and you have a few weeks to pay it off completely, without incurring debt.
- Buy now, pay later (BNPL): BNPLs allow you to split your payments usually into four interest-free installments that are due every other week.
- Holiday loans: A type of personal loan, holiday loans are offered by financial institutions, like banks, credit unions and online lenders throughout the season, with a fixed interest rate and repayment term. These can be a good alternative to credit cards, as their interest rates tend to be much lower, plus you get a lump sum instead of spending as you go, so you can stay on a budget.