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Published: November 2008

Consumers plan to reduce holiday spending

Consumers have sharply weaker holiday spending plans this year compared to previous years, according to the ninth annual holiday spending survey conducted by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA).

Download a copy of the press release with more detail about the survey

Below is a summarized excerpt from the press release:

Each year from 2003 to 2007, between 30 and 35 percent of consumers reported that they were planning to cut back their holiday spending.  This year, 55 percent said they were planning to reduce this spending as least “somewhat”, with 27 percent of all respondents indicating that they planned to spend "much less than last year."

In response to an open-ended survey question asking those intending to spend less for the most important reason for this decision, the vast majority of respondents indicated either constrained finances or financial anxiety about the future.  The most frequent responses were:  the economy and related economic uncertainty (36%), less money (22%), a desire to save or reduce debt (12.5%), higher prices (10.5%), and less income (9%).  

One important factor contributing to financial anxiety is concern about meeting monthly debt payments.  In response to the question -- "In general, how concerned or unconcerned would you say you are about meeting your monthly payments on all types of debt?" -- a record 48 percent said they were "concerned," with 23 percent indicating that they were "very concerned."  In 2007, only 40 percent said they were concerned.

Those most likely to express concern about meeting monthly debt payments are young adults aged 18-24 (66%), African-Americans (70%), and those with modest incomes of $25,000-$35,000 (64%).  

CUNA and CFA suggest the following tips to avoid getting deep into debt during the holidays:

Make Budget, and a List
Right now, decide how much you can afford to spend and stay within that budget.  Staying within 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, and then call several.

Pay Off Debts Quickly You’re less likely to overdo it if you pay in cash.  If you must make holiday purchases using credit, use a lower-interest card and pay off this debt as soon as possible early next year. Don’t borrow more than you can repay in several months.

Plan for Next Year by Opening a Christmas Club Account
While these accounts do not pay much if any 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.

Be Smart About Gift Cards
If you don’t use a gift card promptly, it can lose value in one of several ways:  It can expire and become worthless; monthly maintenance fees can erode its value to zero; the store that issued it can go bankrupt or stop honoring gift cards. 

Pay Attention to the Return Policy
Some stores are tightening their policies.  Pay attention to the return policy when you make a purchase; keep receipts and note time limits, restocking fees, and other factors that may affect your recipient.

Find Low- or No-Cost Ways to Celebrate
Adding a few changes can ease the strain on your spending budget.  For example, draw names to limit the number of people for whom you purchase gifts; give homemade items; make your own gift wrap; organize a potluck rather than trying to make, and pay for, the entire holiday meal.

For More Information

Consumer Federation of America

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Credit   ♦   Credit Cards   ♦