Inflation won't cancel the holidays, but it will lead to credit card debt

• Almost 2 in 5 Americans (37%) say they are willing to take on credit card debt for the holidays this year; among them, the most common reason why they are willing to do so is that they don’t want to disappoint their children/family members (43%). Additionally, 55% of Americans already have credit card debt.

• Nearly three quarters of Americans (73%) say their holiday budget will be smaller this year compared to last year, with more than half (56%) attributing a reduced budget to inflation

• Nearly two thirds of Americans (66%) say inflation has caused them to change their plans for the holidays this year

• Among those willing to take on credit card debt for the holidays this year, Gen Z (ages 18-25; 43%) are more likely to say it is because they would be embarrassed to cancel or change plans this holiday season because they couldn’t afford it, compared to Millennials (ages 26-41; 29%), Gen Xers (ages 42-57; 27%) and Baby Boomers (ages 58-76; 14%)

Fears of a recession and rising inflation are looming over the holidays as consumers begin their planning and shopping. As a result, Americans may be facing a third year of disappointment after two years of canceled plans due to the pandemic. While some Americans are willing to make adjustments, others are determined to make the holidays happen – no matter the cost. 

With annual inflation remaining at record highs, rising prices are top of mind for many, shifting the way they will spend this holiday season. In fact, a new Tally survey of 2,034 U.S. adults ages 18 and older, conducted online by The Harris Poll, found that nearly two thirds of Americans (66%) say inflation has caused them to change their plans for the holidays this year. 

Despite this economic reality, those with families are especially invested in making sure their loved ones experience this holiday season like any other, with almost 2 in 5 Americans (37%) willing to take on credit card debt for the holidays this year, and the top reason for doing so being not disappointing children/family members (43%). Millennials (54%) are more likely than Gen Z (42%), Gen Xers (35%) and Baby Boomers (24%) to be willing to take on credit card debt for the holidays this year. A sentimental time of year, many are eager to shower their loved ones with special experiences and check off their wish lists despite feeling the pinch in their wallets.

Generational priorities: avoiding disappointment vs. avoiding embarrassment

When it comes to the reasons why some are willing to take on credit card debt for the holidays this year, the results varied across demographics, highlighting their priorities. Among those willing to take on credit card debt for the holidays, 43% shared not wanting to disappoint their children and/or family members as a reason, including 48% of Baby Boomers, 43% of Millennials, and 41% of Gen Xers.The second most cited reason was not wanting to miss out on experiences with friends and/or family because they couldn't afford it (40%) - a telling reflection of how the pandemic likely had a lasting impact on those who had to shelter in place away from family and friends.

A striking contrast among generations? Avoiding financial shame. Among those who are willing to take on credit card debt for the holidays this year, Gen Z (43%) are more likely to say it is because they would be too embarrassed to cancel or change plans this holiday seasonbecause they couldn’t afford it, compared to Millennials (29%), Gen Xers (27%) and Baby Boomers (14%). Younger adults may be more susceptible to spending to keep up with their peers, a challenging cycle especially as it gets more expensive to have and hold debt with rising interest rates. In fact, more than half of Gen Z (54%) currently use credit cards to pay for necessities, such as groceries, rent/mortgage and bills, due to inflation. 

Only 19% of Americans who are willing to take on credit card debt for the holidays this year say it is because they are not worried about money this holiday season.

Inflation's presence scales back presents

Many Americans are eager to reclaim holiday celebrations they lost during the height of the pandemic by going all out this year with gifting and gathering. However, many may find themselves with less wiggle room than in previous years and anticipate the upcoming holidays to become more of a financial burden. 

Nearly three quarters of Americans (73%) say their holiday budget will be smaller this year compared to last year, with more than half (56%) attributing a reduced budget to inflation. Other factors cited for smaller holiday budgets this year include credit card debt (26%) and unforeseen circumstances like medical emergencies or unexpected home repairs (25%). For others, perhaps savings stemming from the pandemic are at the forefront of their holiday plans with 21% of Americans saying their holiday budget will not be smaller this year compared to last year.

Parents and guardians in particular are feeling the pinch with more than 4 in 5 of those with children under 18 living in the household (81%) and parents of children under 18 (82%) sharing their holidays budgets will be smaller this year, compared to only about two thirds of their counterparts (68% each).

Family obligations drive festive spending

Young children’s parents and guardians often feel a lot of pressure to make the holidays magical and memorable. This seems particularly true after likely spending the previous two holiday seasons social distancing or unable to celebrate in full as they typically would.

Among parents of children under 18 who are willing to take on credit card debt for the holidays this year, half (50%) say not wanting to disappoint their children/family members is why they are willing to take on that debt. A bittersweet notion as 64% of all parents with children under 18 currently have credit card debt.

Many are also using credit cards already to pay for necessities like groceries, rent/mortgage payments and bills due to inflation. In fact, 59% of parents with children under 18 are using credit cards for those essential expenses. 

Financial Tips For the Holidays During Inflation

Debt or disappointment. You don’t have to choose. 

• Parents aren’t alone in feeling the pressure between taking on debt or disappointing their kids.

• We want to give our kids the best, but it’s important to have a strategy for your gifts (and a budget!). Don’t dig yourself into debt for it. 

• If your kids are asking for gifts that are not in your budget, ask relatives to contribute (hello grandparents!). You’re helping them out if they were already planning to buy them a gift.

• For older kids, ask them what they want. If it is out of budget, consider gifting them money towards that gift that they can add to themselves.

• For younger kids who love opening LOTS of gifts, snag deals. Or if there’s one big toy they want, stick with that.

Don’t let embarrassment drive you to debt. 

• Peer pressure to overspend is real – especially during the holidays. 

• Don’t base financial decisions on what others think. For all you know, they may have debt. You are the one who has to pay your credit card bill.

• If you already started putting Christmas on a credit card, assess your interest rates and try not to add to it. Consider an app like Tally, which gives you a lower interest line of credit and pays your cards off in the most efficient way possible. That frees up cash for the holidays AND you have a plan for your debt. 

• And before you say yes to all things festive, assess your budget. Cut back where possible. Reallocate that money to what matters now. Only say yes to what you can afford. 

• For things you can’t afford, that’s your business. You don’t have to tell anyone it’s about money.

Find ways to stretch your budget. 

• Pause other discretionary spending – streaming services, ordering takeout, etc. for now. Put that fun money toward your holiday budget. 

• Go potluck for holiday parties. Don’t put all the (financial) pressure on yourself to provide all the food. Ask people to bring their favorite holiday dish instead of a gift!

• Switch to using a debit card. That way you can only spend what you have. 

• All of these free up a little extra cash to help with the holidays. 

Methodology

This survey was conducted online within the United States by The Harris Poll on behalf of Tally from October 13-17, 2022 among 2,034 U.S. adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 2.8 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact press@meettally.com.