Navigating the 2020 Holiday Shopping Season
Two in five shoppers are taking a different approach to giveaways this year, according to a recent Chase poll. This includes 55% who plan to focus on quality over quantity and 36% who plan to buy practical gifts for loved ones.
Most of these purchases will take place online, according to our partner site CreditCards.com, which found 71 percent of vacation buyers will do most of their shopping online (up from 51% a year ago).
We thought a lot of that activity would be carried over to October, making it a much longer holiday shopping season than the usual Black Friday sprint on Christmas Eve. Almost half of consumers told CreditCards.com that they will start their winter vacation shopping before Halloween.
However, the Commerce Department reported that October retail sales were only up 0.3% from September. This is concerning for retailers, especially since Amazon Prime Day was held in October for the first time and Target and Walmart responded with their own major promotions.
It’s possible that both are true: Vacation buyers may have started early, but they might be particularly price-conscious this year and they might buy fewer people. This would make sense as the unemployment rate remains high, much of the government’s stimulus package has worn off, and many in-person gatherings are limited due to the COVID-19 pandemic.
To that end, 33% of U.S. adults told CreditCards.com that they plan to spend less on vacation this year, and only 9% plan to spend more than in 2019. The biggest cuts are expected to be in travel and entertainment. In each category, the number of people planning to spend less than last year is almost six times as large as the group that plans to spend more. When it comes to giving gifts, it’s more like 2 for 1 in favor of the discount.
Another Bankrate sister site, The Points Guy, states that only 18% of Americans will travel for vacation this year (in this case, they have defined “trip” as a trip of several hours by car, plane, train. , etc.). determined that an additional 25 percent usually travel for vacation, but will not do so this year.
This continues a trend of one year. Whether we’re looking at Chase’s travel spending data or TSA passenger checkpoint numbers, it’s no secret that travel has been wiped out by the pandemic. This has been difficult for the credit card companies that rely on these expenses and focus on travel rewards. Unfortunately, the holidays are more alike, especially with COVID cases on the rise in many areas and renewed restrictions taking effect in many locations.
If you had planned a trip and will not be able to go, there is a good chance that you will be reimbursed by the travel provider (airline, hotel, etc.). This may be a voucher for future travel rather than actual cash. Most travel providers have made their cancellation policies much more generous during the pandemic. If you come across a dilemma, try to resolve it wherever you made the reservation. If that doesn’t work, File a dispute with your credit or debit card issuer.
How to save on gifts
My favorite way to save money when shopping for vacation is to use online shopping portals. That means logging into a site like Rakuten or Shop Through Chase first and using their links to Nike.com, Macys.com, or wherever you plan to shop. It’s affiliate marketing – that simple step of going through a middleman can result in significant cash back for thousands of merchants online. Best of all, you can combine your shopping portal savings with store coupon codes and reward credit cards for added impact.
Card-related offers are a similar concept that can be used online or in-store. These are digital coupons that you sign up for through your card issuer (for example, Amex offers and Hunting offers), and when you make an applicable purchase, the discount is automatic. You can also stack them with store coupon codes.
How to pay
Credit card generally offer much more lucrative rewards than debit cards. They also benefit from much better consumer protection (fraud resolution, purchase protection, extended warranties, etc.). The main drawback is the interest. you will be billed an average APR of around 16% if you have month-to-month credit card debt. Pay in full if you can.
If you can’t, maybe you should stick with cash, debit, or a tighter vacation budget. Cheaper financing plans are available, but be careful. Buy now, pay later, companies like Affirm, Afterpay, and Klarna are gaining traction. Sometimes this works well, especially if you are able to pay it off in full within six weeks of the 0% interest period that many offer. Still, buying something that you can’t afford today with the expectation of paying it off in a few weeks is a slippery slope. You could gain the upper hand and incur interest and late fees.
Card issuers have their own versions of these plans (such as American Express Pay It Schedule It, Citi Flex Pay and My Pursuit Plan). These are basically credit card installment hybrid loan plans. Rather than indefinite credit card debt, cardholders commit to a set repayment period (say, six or 12 months) and they are usually rewarded with a lower interest rate (these companies prefer call it something other than interest, like a fresh plan, although it’s mostly interest).
Conditions vary widely depending on creditworthiness. Some people get the equivalent of an APR of 7%, which is pretty good. Others are in the same 15-20% range as traditional credit card purchases. Again, proceed with caution. These programs are not as good as paying in full, but they are certainly better than making minimum payments.
Many stores also have their own credit cards. Some fees insanely high interest rates (eg 29.99% at Big Lots, Discount Tire, Kay Jewelers and Zales), while others have attractive rewards programs. Getting 5% Cash Back at Target, Amazon, Walmart, Wayfair, or Best Buy is worth it if you are loyal to the store and can pay in full to avoid interest.
Beware of deferred interest store promotions. No interest for a year sounds great, but often the fine print says if you don’t pay in full, they’ll charge you retroactive interest on your average daily balance from the start.
Nearly half of millennials (24-39), parents with kids under 18, and people with credit card debt think vacations are an acceptable reason to get into (more) debt, according to CreditCards .com.
Resist this temptation. If you incur vacation debt of $ 1,000 and only make minimum credit card payments at 16% APR, it will take you about three years to pay it off and you will need to pay $ 267 in interest. . That’s on top of what you might already owe (about half of U.S. households already have credit card debt, and the average is $ 6,300, according to the Federal Reserve).
I know it’s been a tough year. Better times are ahead. We’re getting good news on COVID vaccines and 2021 could bring a big rebound. Try to get into it on the best possible financial basis.
Honestly, most of us don’t even remember what we had last Christmas. Instead of expensive clothes or electronics, you might be able to do something for a friend or relative if you are smart or skilled in the kitchen. Or you can offer them time by offering to do home repairs, walk their dogs, or babysit. After all, it’s the thought that counts.
A question about credit cards? Email me at firstname.lastname@example.org and I would be happy to help.