Gephardt: Feeling The Holiday Pressure To Spend? Credit Card Charges Could Stretch Holiday Debt For Years
SALT LAKE CITY, Utah – If you’re planning to rack up charges on your credit card for your holiday shopping, new research shows you’re not alone.
People going into debt during the holidays certainly isn’t anything new. But with a raging pandemic and economic uncertainty, will it be harder than usual for folks to climb back out of the hole?
2020 has been lousy for a lot of folks and kids are no exception: Closed schools, canceled birthday parties, even Disneyland – the happiest place on Earth – has been shuttered.
Now, there is growing fear from economists that parents may try to make up for all these setbacks and others by breaking the bank during the holidays.
“I think there’s a lot of pressure,” said Ted Rossman, a credit card industry analyst with CreditCards.com. “(They) have young kids but they also have other financial priorities, like paying off student loans, maybe buying a house. I think a lot of these things go together and they kind of squeeze people’s finances.”
Rossman’s firm recently conducted a survey and found millions of Americans believe going into debt this Christmas season is OK, even as the pandemic and economic uncertainty looms.
Forty-six percent of cardholders with children under the age of 18 believe that holiday spending justifies going into debt, compared to 32% of cardholders who don’t have kids. Folks with children under the age of 18 are nearly twice as likely as non-parent cardholders (61% vs. 34%) to be willing to go into debt for the holidays.
Rossman said the data shows dangerous thinking.
“Yes, a lot of parents are feeling that way,” Rossman answered when we spoke about parents feeling the pressure to make the holidays great when the year was, well, lousy. “And, what I would say to that is try not to feel that pressure from society or other people.”
Rossman pointed out that the average credit card rate is about 16%, though for many it is higher.
“Even at 16%, if you’re only making those minimum payments, $1,000 is going to take you five years to pay off,” Rossman calculated. “And it’s going to add about $440 in interest.”
And Rossman said other surveys have shown that most people cherish experiences over presents and while experiences have been fleeting this year, they’ll be back.
“What did I get last Christmas?’ A lot of us don’t even remember,” he said. “I think that’s true for adults and kids – what we cherish are the more intangible things.”
There is good news when it comes to credit card debt in 2020, even with millions of Americans out of work. Nationally, credit card debt is down by about 10%.