money Americans plan to spend more during the holidays to make up for a lousy 2020
Americans are so determined to wrap up 2020 with some cheer that they’re reaching further into their wallets to make that happen, according to several surveys.
Two out of three Americans plan to spend the same or more during the holidays after enduring the year’s biggest interruption — the COVID-19 pandemic — according to two online surveys of 3,412 people from RetailMeNot.
Americans intend to shell out $775 on average, or $114 more than last year, a separate survey from Experian found, even turning to credit cards for help.
Read more: How to protect yourself from porch pirates this holiday season
Collective spending is projected to increase by 3.6% to 5.2% from 2019, totaling up to $766.7 billion, according to the National Retail Federation.
“After all they’ve been through, we think there’s going to be a psychological factor that they owe it to themselves and their families to have a better-than-normal holiday,” said National Retail Federation Chief Economist Jack Kleinhenz in a press release.
But that spending hinges on the health of the country and how diligently people follow the recommendations of doctors and public health experts. If cases continue to ramp up as they have, businesses could see renewed restrictions when sales are crucial.
Read more: 6 tips to protect yourself while online shopping this holiday season
“The near-term concern is the long shadow cast on the economy by the surging virus and expiring government support,” Kleinhenz said. “Every virus indicator across the United States is elevated and accelerated, which could pump the brakes on the momentum we have seen and have consequences for spending.”
Despite the pandemic, industry analysts remain optimistic that Americans will continue to spend with the same gusto as the rest of this year, driving sales up 6.4% year over year through October, the NRF found. Spending is also still comparatively higher than it was during the 2008 and 2009’s Great Recession winter holiday seasons.
‘Tale of two shoppers’
The 2020 season will likely resemble a “tale of two shoppers,” according to Sara Skirboll, shopping and trends expert at RetailMeNot.
On one end, shoppers who remain employed will likely spend their money on luxury items such as electronics, with money budgeted for gifts for themselves as well as others, Skirboll said.
Many of these households spent less as a byproduct of government restrictions and mandates for public health. Expenses on travel, entertainment, personal services, and dining are broadly down, bolstering their savings going into the holidays.
But for those who are struggling or out of work — 20.1 million Americans currently rely on unemployment benefits — their holiday spending plans likely include household essentials or items to support distance learning, with gifting priority going to immediate family — especially young children — and close friends.
“People are looking to spend money on things they need [and] less on things that they want,” Skirboll said, “especially if they're unemployed.”
Turning to credit cards
The national personal savings rate has steadily slipped since government assistance programs like stimulus checks and additional unemployment benefits have disappeared. Two more jobless benefit programs are set to expire the day after Christmas.
Read more: Pros and cons of store credit cards
Since a second stimulus check before year-end looks improbable, some Americans may turn to credit to bridge the gap between competing financial priorities like holiday celebrations and basic necessities.
Experian found that nearly half of Americans (45%) whose shopping has been affected by the pandemic are opening new credit cards. That echoes another survey from LendingTree, which found that 44% of Americans say they’re at least somewhat likely to apply for a store card during the holiday shopping season, up 12 percentage points from 20 last year and 20 percentage points from 2018.
“So many people get these cards because they may not have any other options, or at least any other good options,” Matt Schulz, LendingTree’s chief credit analyst, told Yahoo Money. “If people can get these cards and extend their holiday budget, a little bit, or give them a little more time to pay those bills, they will.”
Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. Follow her on Twitter @SJAsymkos.
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