Washington, D.C. – Consumers say they will restrain their holiday spending this year, according to the third annual holiday spending survey sponsored by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA). Rising concerns about consumer indebtedness may help explain this spending restraint.
The survey of more than 1,000 representative adult Americans was conducted in early November (7-10) by the Opinion Research Corporation International. The margin of error for the statistics is plus or minus three percentage points.
Holiday Spending Plans Restrained
When asked whether they intend to spend more or less during this holiday season than last year’s, about three-fifths (61%) said they planned to spend about the same. But a larger percentage said they would spend less (21%) than more (15%).
One positive sign is that consumers are not as cautious going into this year’s holiday season as they were last year. Last year’s survey, conducted less than two months after 9/11, found that far more consumers intended to cut back (28%) than increase (13%) holiday spending from the previous year (2000).
This spending restraint is also seen in responses to the question, “What would you do with a windfall of $5,000?” This year, only 13% of those surveyed said they would spend it, down from 17% in 2001. About equal numbers said they would use the funds to pay down debt (40%) and save or invest it (41%).
“These results suggest the holiday spending season, although not robust, will not be as weak as some might have expected,” said Bill Hampel, chief economist of the Credit Union National Association.
Consumer Debt Concerns and Levels May Help Explain Restraint
Concern about paying off consumer debts may explain this intended spending restraint. From last year to this one, consumer concern about “meeting your monthly payments on all types of debt other than your mortgage” rose from 39% to 46%. And those “very concerned” about making these debt payments rose even more sharply, from 19% to 30%.
Consumer Restraint Extends to Holiday Credit Card Use
Despite this rising concern about paying off all consumer debts, relatively few worry about paying off credit card debt from holiday spending (27%), and a large majority (65%) are unconcerned.
That apparently is because they intend to exercise restraint in charging holiday purchases. While over half say they intend to use a credit card for holiday purchases, only about one-quarter (26%) say they will charge most of these purchases. Just as importantly, the affluent — who are best able to afford credit card debt — are far more likely than the least affluent to use credit cards for holiday spending.
Nearly three-quarters (73%) of those with incomes over $50,000 say they plan to use credit cards for holiday purchases, and 37% say they intend to use plastic for most holiday purchases. Only about one-tenth (11%) of those with incomes below $35,000 say they plan to make most holiday purchases with credit cards.
CUNA and CFA Suggest Holiday Spending Tips
CUNA and CFA suggest the following tips to avoid the post-holiday debt blues.
Budget Holiday Spending: Right now, decide how much you can afford to spend and stay within that budget.
Make a List: Staying within this budget will be much easier if you make a price list of all gifts and other holiday items you plan to purchase.
Comparison Shop: You can easily save more than 10 percent on most items, sometimes considerably more, by comparing prices at different stores. The easiest way to do this is to identify sellers using the Yellow Pages, then call several.
Pay Off Debts As Quickly As Possible: If you must make holiday purchases using credit, early next year pay off this debt as soon as possible. Remember that credit card debt is relatively expensive. And if you only make the 1.5% required monthly payment, you probably will never pay off the debt.
Plan for Next Year by Opening a Christmas Club Account: While these accounts do not pay much interest, they provide a practical way to save small amounts over time. Ask your credit union or bank to automatically transfer funds from your checking to your Christmas Club account every month.
Contact: Mark Wolff, CUNA, 202/508-6764, cell: 202/262-3712; Jack Gillis, CFA, 202/737-0766
CUNA is the primary national trade association for the country’s 10,000 state and federally chartered credit unions, which are not-for-profit financial cooperatives serving more than 83 million Americans. CFA is a non-profit association of more than 285 consumer groups that seek to advance consumer interests through advocacy and education.