Holiday sales are on track to grow as much as 11.5% over 2020, according to a projection by the National Retail Federation.
About 30% of Americans said they overspent during the gift-giving season, according to a post-holiday survey by WalletHub. Although omicron drove a new wave of infections, more than half, or 56%, said Covid did not affect their plans, the survey found.
For most shoppers, increasing their spending also meant relying more on credit cards or buy now, pay later financing to spread out their expenses.
As a result, roughly 36% of consumers went into debt, owing an average of $1,249, according to a separate survey by LendingTree.
Buy now, pay later has exploded in popularity with the rise in online shopping during the pandemic; however, studies show installment buying could encourage consumers to spend more than they can afford.
Although these programs let shoppers break their purchases into equal payments, often interest-free, there could be late fees, deferred interest or other penalties if you miss a payment.
Credit cards, on the other hand, are one of the most expensive ways to borrow, with interest rates of more than 16%, on average. If you have bad credit, you’ll pay even more: Roughly one-quarter of borrowers have an APR between 20% and 29%, LendingTree found, while 9% had an APR higher than 30%.
Usually, card balances decline in the beginning of the year as borrowers pay off their holiday purchases.
However, as 2022 gets underway, credit card balances are expected to rise even higher as consumers continue to increase their spending, according to a separate forecast by TransUnion.
This year, paying down debt will be a challenge, most consumers said. In fact, 82% of those with holiday debt won’t pay it off within a month, LendingTree found, despite sky-high interest charges.