Welcome to Extreme Investor Network, where we provide expert insights and unique information on all things personal finance. Today, we’re diving into the topic of holiday spending and how shoppers are financing their purchases.
The holiday season is known for Americans splurging on gifts for their loved ones. This year, holiday spending is expected to reach record levels, with estimates ranging from $979.5 billion to $989 billion between Nov. 1 and Dec. 31, according to the National Retail Federation. Despite the soaring credit card debt topping $1.14 trillion, holiday shoppers are projected to spend an average of $1,778, marking an 8% increase compared to last year, as per Deloitte’s holiday retail survey. Surprisingly, 28% of holiday shoppers still have not paid off the gifts they bought last year, highlighting the ongoing impact of holiday spending on personal finances.
As we head into the peak holiday shopping season, it’s interesting to note that 74% of shoppers plan to use credit cards to make their purchases, according to a report by NerdWallet. Additionally, 28% will dip into their savings, while 16% will leverage buy now, pay later services. Buy now, pay later options are emerging as a popular choice for consumers, with Adobe forecasting a significant peak in spending on Cyber Monday. However, experts caution that these loans can be challenging to track and may lead to overspending and financial troubles.
When it comes to financing holiday purchases, credit cards are often viewed as one of the most expensive ways to borrow money due to high-interest rates. On the other hand, installment payment plans at 0% interest can be a more practical option. Nevertheless, buy now, pay later loans are considered another form of credit with potential risks. The more accounts consumers open, the more susceptible they are to overspending, missed payments, and a negative credit history. Late payments on buy now, pay later loans can incur high penalties, sometimes reaching interest rates comparable to credit cards.
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