The news: Many consumers kicked off their holiday spending this weekend, but economic uncertainty and inflationary pressures will shift what they’re spending on and how, per a November survey from PYMNTS and i2c.
- Spending on gifts is expected to increase a modest 2% year over year (YoY) across income levels, averaging roughly $1,000.
- But spending on non-gift holiday purchases will decrease this year, at roughly $860 per consumer compared with $1,160 last year. These purchases include travel, dining out, and experiences like live entertainment.
Bills trump shopping sprees: Student loan repayments will be a driving force behind holiday budgeting.
- About 17% of consumers have student loans to repay after the pandemic-driven pause in repayments, according to Deloitte. The average monthly payment is expected to be roughly $400 per borrower.
- Almost half (48%) of these consumers plan to adjust spending by cutting back on holiday expenditures, per Deloitte’s holiday retail survey. It will also reinforce more cost-conscious behaviors like searching for deals and rewards.
Four trends to watch: Here’s what payments firms should be aware of to stay competitive during what’s expected to be a more frugal holiday shopping season.
1. Credit cards will be the top payment choice this holiday season.
- About 62% of consumers plan to cover holiday expenses with a credit card.
- Credit card use during the holidays will increase across income levels and generations.
- More than two-thirds (68%) of baby boomers and 64% of Gen Xers will use credit cards, compared with 44% of Gen Z shoppers.
Credit card providers have beefed up their rewards offerings ahead of the holidays to capture this volume.
But putting so much holiday spending on credit cards could add to rising consumer debt loads and delinquencies.
- Credit card balances increased 15% YoY to a record $995 billion in Q3 2023, per TransUnion.
- And the 90-day borrower delinquency rate was 2.34% in Q3, up from 1.94% in Q3 last year, and 1.82% pre-pandemic in Q3 2019.