Inflation remains stubbornly high this holiday shopping season, and while there’s little sign that sales are down, financial experts say consumers have options to curb their spending instead. With interest rates expected to increase further, the experts say restraint today could save consumers more money in months to come.
Heather Murray, director of compliance and community relations at Advantage Credit Counseling Service, noted that credit card usage has risen as households spend down their pandemic savings and stimulus money while simultaneously facing higher prices.
“We're definitely seeing a lot more consumers reaching out to us about our credit counseling and our debt management program,” she said. “So with the interest rates increasing, credit card interest rates are also going up. If you're carrying large balances on your credit card, it's making it harder to make those payments every month.”
Murray’s South Side-based agency serves clients in Pennsylvania as far as the Scranton area. Between this January and October, it conducted nearly 2,400 credit counseling sessions — a 31% jump over the roughly 1,830 sessions it led during the same period last year.
Credit card balances have grown nationally, too, this summer undergoing their largest year-over-year increase in more than 20 years, according to the Federal Reserve Bank of New York. Interest on credit card debt, meanwhile, reached a record high this month. The website Bankrate calculated an average rate of 19.14% in mid-November.
Higher borrowing costs have yet to ward off inflation, however. PNC Bank’s annual “Christmas price index” climbed by 10.5% compared to a year ago – the third-highest increase in the measure’s 39-year history. The figure captures the average change in prices for the gifts named in the holiday carol, “The Twelve Days of Christmas.”
Still, the National Retail Federation projects between a 6% and 8% rise in holiday sales revenue in the U.S. this year. In November, the trade group’s leaders said that the increase reflects a higher volume of sales, not just higher prices. But others expect holiday sales to fall once adjusted for inflation.
Regardless, PNC executive vice president Jim Balouris said, during the “holidays, we naturally spend more. We want to buy gifts, and we … tend to bring people over and entertain.”
Balouris leads retail banking for branches across southwestern Pennsylvania. He said clients could pad their holiday budgets by canceling streaming services, gym memberships, and other subscriptions they don’t use frequently enough to warrant the expense. Other lifestyle changes, such as dining out less, can also make a difference, he said.
He noted that, for such adjustments to stick, it helps simply to pay attention.
“And that may be going into the online banking every morning and looking at it. Or, go old-fashioned, and write it down. Keep the receipts of everything you do and then log it. Awareness helps,” he said.
But “with these automatic subscriptions [or if] you sign up for a gym membership [and] you don't go to the gym. [Or] you sign up for a streaming service, you sign up for a music service, you sign up for this, you sign up for that, next thing you know, you're like, ‘Where's my money going?’”
Advantage’s Murray said households could also take steps to limit their holiday spending, too:
- Shorten your shopping list. “Encourage your family to … participate in a grab bag where you're only buying one gift for a person,” she said, “and maybe do a white elephant gift exchange where you're bringing something fun and maybe a little bit crazy from your house to re-gift to give to someone else in your family.”
- Prioritize recipients. “You want to prioritize who you're going to be buying for if your money is tight this year,” Murray said. “So if you want to focus mainly on your kids, talk to your other family members and try and figure out a way to still enjoy the holidays, but maybe without focusing so much on the gift-giving part of it.”
- Look for deals. Murray expects retailers to offer more discounts this year to counteract the effects of inflation. She noted that holiday sales started early this year, with outlets hedging against future price changes and supply fluctuations while also trying to reduce inventories.
“People don't have as much extra money this year, so I think you are going to be able to find some nice discounts on items,” she said. “Don't be afraid to shop around and look at several different places for the same item just to make sure you're getting the lowest price on it.”
Murray acknowledged these ideas wouldn’t work for everyone. “I think everybody wants to make your family happy over the holidays, and a lot of times, that does translate into overbuying or overspending on gifts,” she said.
It also leads to lower demand for credit counseling.
“Clients are more interested in their holiday spending and aren't ready to focus on their finances yet,” Murray said. “So they wait until … after they … overspend for the holidays and then come in January. And we find that consumers have racked up some holiday debt [toward] the end of the year.”
But she said, at that point, consumers have the best chance of improving in the year ahead: She said January is when people who struggle with spending should begin to budget for the holidays.
“The best way to handle this situation,” she said, “is to really plan for it all year.”
