As the Federal Reserve announced a 16 year low in credit card delinquencies’ this year, it’s clear that consumers are more concerned about their budgeting habits. But that seems to go all out the window when it comes to holiday shopping, according to a recent combination of studies.
Consumers’ number one fear this holiday season is overspending, according to a study by The Western Union Co. and Wakefield Research. According to the research, 69 percent of the people surveyed planned to create a budget for the holiday season, and another 62 percent said that they wouldn’t mind spending more if they found the perfect gift outside of their price range.
Due to a holiday season frenzy known as Cyber Monday and other online shopping deals prominent during the holiday season, consumers are using their credit cards more and more to complete online transactions. According to Javelin Strategy & Research, a financial services global research firm, the use of credit cards for online purchases will continue to increase to $444 billion in 2016. It currently is at $309 billion.
“Despite the nation’s very rocky economic recovery, consumers appear to have halted their belt-tightening and bank incentives to use credit cards,” director of research payments at Javelin Stragety & Research.
Credit cards are promoted for online usage, because they are the safest option when it comes to purchase protection. But because of this protection and other bonuses offered, consumers spend more when using their credit card. Research shows that consumers spend more money on an online transaction with a credit card than with any other payment option. With a major debit card, consumers are more likely to spend $58.29, but while using a major credit card, the average consumers spend $82.10. Payment numbers are amplified during the holiday season, when consumers often overspend in attempt to take advantage of the best deal.
A survey by FreeScore.com found that American consumers are aware of their overspending and 24 percent believe their balances will increase to above average numbers following the holiday season. The trend is increasing, because in 2010, only 19 percent of those surveyed felt that way. It could be consumers are just saving up before the holidays in an attempt to compensate for the spending that they will do over the holiday season. “Consumers should know to not spend more than they can realistically pay back, regardless of deals and discounts,” Carrie Coghill, director of consumer education for FreeScore.com. It’s important to only buy what you can afford to pay for in the first three months of the next year.