4 Ways Americans Are Paying For Gifts This Holiday Season
Written by
Josephine Nesbit
Edited by
Levi Leidy
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Americans are digging deeper into their pockets to pay for gifts this holiday season.
According to a recent Insurify survey, Americans will spend an average of $528 on holiday gifts this year, representing about 12% of the country’s average monthly income, according to U.S. Bureau of Labor Statistics. The survey also revealed that 14% of Americans plan to spend more than they can afford this year.
Insurify’s survey showed that the rise of buy now, pay later (BNPL) loans and shopping online may fuel overspending. Online shoppers are 4.6 times more likely than in-store shoppers to spend more than they can afford on gifts.
Most shoppers (72%) are also making financial sacrifices to afford the holidays, a recent CNET survey showed. People are buying fewer gifts, shopping for fewer people and cutting back on nonessentials.
Here are four ways Americans are paying for gifts this holiday season.
Savings
Most shoppers (62%) plan to use their debit card or cash to purchase holiday gifts, Insurify found. Paying with money you already have is the best way to avoid accumulating debt, late fees and interest charges.
“Don’t buy it if you don’t have money,” Gregg Murset, a certified financial planner and CEO of BusyKid, explained to CNET. Murset recommends shopping with a debit card as a self-restraint tool. “I know that’s so boring, but it’s absolutely the right thing to do.”
Buy Now, Pay Later
BNPL loans are a short-term financing option that allows shoppers to purchase an item and pay it back in installments over a set period of time. While BNPL loans are interest-free, you’ll be charged a hefty late fee if you miss a payment and it could hurt your credit score.
Insurify’s survey found that 19% of shoppers plan on using BNPL loans to cover costs, like Affirm and Klarna. According to Insurify, shoppers who plan to overspend this holiday are 2.3 times more likely to use BNPL to pay for gifts compared to consumers who plan to spend less than they can afford this year.
Credit Cards
According to Insurify, 51% of Americans plan to use credit cards to purchase holiday gifts, second only to debit cards.
Evan Zimmer, CNET’s credit card editor, said it only makes sense to use credit cards for holiday shopping if you can afford to pay off the balance right away. If you only make the minimum payment and let the balance roll over to the next month, you could be paying 22.78% in interest, according to Federal Reserve data from the second quarter of 2024.
Gift Cards
Surprisingly, 27% of Americans are turning to gift cards to fund holiday purchases, Insurify’s survey revealed. According to Capital One Shopping, Americans have unused gift cards totaling $187. This can be a good way to purchase gifts (or give the card directly to someone) without overspending this holiday season.
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