Most Americans are still planning to purchase holiday gifts this year, but the COVID-19 pandemic will impact how millions of U.S. adults shop and give.
By Erin El Issa | NerdWallet
While 2020 has been a year of uncertainty in the U.S. and around the world, we can still count on holiday gift-giving. More than 201 million Americans (79%) plan to purchase gifts this holiday season, spending an estimated $167 billion ($831, on average, per shopper), according to a new NerdWallet survey. And while this is less than the $184 billion Americans planned to spend last holiday season, it’s not the spending dive you might expect in this year of financial precarity.
That’s not to say this holiday season won’t look different than it has in years past. According to a NerdWallet survey of 2,049 U.S. adults, conducted online by The Harris Poll, the ongoing COVID-19 pandemic will impact how much Americans spend, how they shop and how they deliver gifts to their loved ones for the holidays this year.
“It’s tempting to spend as much as usual to create a sense of normalcy during a period that is so uncertain. But overspending can lead to more stress in the long run. Sticking to a budget with smart shopping strategies will allow you to experience the pleasures of this gift-giving season without adding to the financial strain,” says Kimberly Palmer, personal finance expert at NerdWallet.
- COVID-19 will impact holiday shopping: Two in 5 2020 holiday shoppers (40%) say they plan to spend less this year due to the pandemic, and about two-thirds of Americans overall (65%) say the pandemic will impact the way they plan to give gifts this year.
- Last year’s holiday debt lingers: A third of 2019 holiday shoppers who incurred credit card debt for last year’s gifts (33%) — or close to 40 million Americans — still haven’t paid off their balances.
- Online shopping preferred to in-store: Two-thirds of 2020 holiday shoppers (67%) plan to do the majority of their gift shopping via online order this year, either for delivery or in-store pickup. This is up from 62% in 2019. Just 32% of 2020 holiday shoppers plan to do the majority of their shopping in-store, down from 37% last year.
- Credit card use up: Three-quarters of 2020 holiday shoppers (75%) plan to put 2020 gift purchases on a credit card, compared to 71% of holiday shoppers in 2019.
- Early sales lessen interest in Black Friday: More than 1 in 5 2020 holiday shoppers (21%) have completed or will complete the majority of their holiday gift purchases during mid-summer and/or fall sales. In fact, half of 2020 holiday shoppers (50%) say the sales offered over the last six months have lessened their interest in Black Friday and Cyber Monday sales this year.
- Charitable giving different this year: More than 3 in 10 Americans (31%) say they’ll spend either more or less on charitable donations this holiday season compared to last year.
Pandemic will impact Americans’ spending and shopping habits
The COVID-19 pandemic has had a widespread impact on Americans’ financial, social and physical well-being. This year, it’ll affect holiday shopping, too. According to our survey, close to two-thirds of Americans (65%) say the pandemic will impact the way they plan to give gifts in 2020 — 30% say they’ll send money or gift cards, and 28% say they’ll ship gifts to loved ones they typically give gifts to in person.
COVID-19 will also impact spending. Two in 5 2020 holiday shoppers (40%) say they’ll spend less on holiday shopping this year due to the pandemic, while only 9% say they’ll spend more.
…talking to friends and family members about lowering budgets, doing a gift exchange, or forgoing gift-giving altogether could be a welcome conversation.
KIMBERLY PALMER, NERDWALLET’S PERSONAL FINANCE EXPERT
While the pandemic’s impact on consumer finances has put many Americans in financial peril, some may be saving money by eliminating costs associated with commuting, travel and child care, amongst other expenses. One in 5 2020 holiday shoppers (20%) say they’ll use coronavirus-related savings to fund some holiday shopping. Still, more than 2 in 5 2020 holiday shoppers (42%) say they’re relying on a second government relief check — which isn’t guaranteed — to help fund their holiday purchases this year.
Savvy shopping strategy: In this year of upheaval, many consumers may want to keep the tradition of holiday gift-giving intact for a sense of normalcy, but that could turn the holidays into yet another financial stressor in 2020. “Since so many Americans are feeling financial strain from the pandemic, talking to friends and family members about lowering budgets, doing a gift exchange, or forgoing gift-giving altogether could be a welcome conversation,” Palmer says.
Millions still paying off holiday debt from 2019
More than half of 2019 holiday shoppers (55%) incurred credit card debt, and a third of those indebted shoppers (33%) still haven’t paid it off. That’s almost 40 million Americans who are still carrying holiday shopping debt from last year. Among 2019 indebted shoppers, millennials (ages 24-39) and Gen Xers (ages 40-55) are more likely to still have lingering holiday shopping debt than baby boomers (ages 56-74) (41% and 38% vs. 24%).
Credit card debt is notoriously expensive for cardholders who carry a balance from month to month, but credit cards often offer rewards and better purchase protection than debit cards. It’s a good idea to use a credit card for holiday shopping, then pay off the balance after receiving your first card statement to avoid interest charges. More than a third of holiday shoppers who incurred credit card debt in 2019 (35%) did just that, a nice improvement on 2018 holiday shoppers who incurred credit card debt, when just 24% paid off their balance with the first statement.
Savvy shopping strategy: As a present to yourself, start saving for next year’s holiday shopping in January and put cash aside each month. You’ll have the freedom to shop throughout the year as you come across deals, and the holidays can be a gift instead of a grievance.
Online holiday shopping up slightly
Online shopping is the preferred shopping method of many Americans, and this year, lowering the risk of coronavirus transmission provides extra incentive to buy online.
Two-thirds of 2020 holiday shoppers (67%) plan to do the majority of their holiday shopping this year online, either for delivery or in-store pickup. This is slightly higher than last year, when 62% of 2019 holiday shoppers said this. The remaining third plan to do the majority of their shopping in store (32%) or another way (2%) this holiday season.
Economic distress among businesses is affecting how people plan to shop for the holidays, too. Over 2 in 5 2020 holiday shoppers (44%) say they will shop more for holiday gifts online this year than in years past due to the closing of brick-and-mortar retailers.
Savvy shopping strategy: Consider creating accounts on retailer websites if you plan to buy hot items this year. Having your payment and shipping information on file will make it easier to snag popular gifts before they go out of stock, or take advantage of a great deal with ease.
Most shoppers charging gifts to credit cards
While about 40 million Americans are still carrying debt from last year, most Americans still plan to use credit cards for this year’s holiday shopping. Three-quarters of 2020 holiday shoppers (75%) plan to put 2020 gift purchases on a credit card, charging $652, on average. But that doesn’t necessarily mean all of these shoppers will incur interest.
Close to 2 in 5 2020 holiday shoppers planning to incur credit card debt this year (37%) say they plan to pay it off with the first statement. But on average, 2020 holiday shoppers think it will take them 3.4 months to pay off these charges. Based on current average interest rates — 15.78% as of May 2020 — that would cost around $19 in interest.
That may not seem like a lot of money, but interest charges can quickly get out of hand. If a shopper opted to make only the monthly minimum payments, it would cost $205 in interest and take 43 months to pay off.
If you do take on credit card debt from holiday shopping, be sure to make a plan to pay it off as soon as possible to avoid racking up interest and fees as we head into 2021.
KIMBERLY PALMER, NERDWALLET’S PERSONAL FINANCE EXPERT
Parents of children under 18 who say they’ll put 2020 gift purchases on a credit card plan to charge a whopping $755, on average, this holiday season and think it will take them 4.5 months, on average, to pay it off. That would cost $28 in interest. If they just made the minimum monthly payments, that amount would balloon to $286 in interest over 52 months.
Savvy shopping strategy: Putting gifts on a credit card isn’t inherently bad, as credit cards are more secure than cash and often come with rewards. However, your rewards won’t outweigh the costs of an interest-accruing credit card, so it doesn’t make sense to carry a balance any longer than necessary.
“If you do take on credit card debt from holiday shopping, be sure to make a plan to pay it off as soon as possible to avoid racking up interest and fees as we head into 2021. It can be hard to make a fresh start in the new year with lingering credit card debt dragging down your finances,” Palmer says.
Shoppers are saving with early sales, coupons and promos
Millions of Americans took advantage of recent sales to check off a good chunk of their shopping lists. Over 1 in 5 2020 holiday shoppers (21%) have completed or will complete the majority of holiday gifts purchases during mid-summer and/or fall sales. And half of 2020 holiday shoppers (50%) say that the sales offered over the last six months have lessened their interest in upcoming Black Friday and Cyber Monday sales.
Still, Americans aren’t forgoing Black Friday shopping altogether. Two-thirds of Americans (66%) plan to shop on Black Friday this year — down from 71% last year — and many Black Friday shoppers plan to shop in store (41%). More than three-quarters of Black Friday shoppers (76%) plan to shop online that day.
Black Friday sales aren’t the only way Americans plan on saving money this holiday season. Retailer coupons/promo codes (39%), price match services (31%) and cash-back credit cards (35%) are all popular money-saving tactics this year.
Savvy shopping strategy: “When you’re buying gifts, be sure to stretch your budget by using cash back or rewards credit cards, signing up for cash-back sites like Rakuten and Ibotta, checking for online promo codes, and comparison shopping with tools like Honey,” Palmer suggests.
Charitable giving changing for millions of Americans
Close to a third of Americans (31%) are either donating more or less to charitable organizations this holiday season than they did last year. Around 1 in 8 Americans (13%) plan to spend more on charitable donations, and almost 1 in 5 (18%) plan on spending less on donations in 2020 than they did in 2019.
…if giving is not in your budget, that’s OK, too — you can always get back on track after focusing on your own financial recovery.
KIMBERLY PALMER, NERDWALLET’S PERSONAL FINANCE EXPERT
Savvy shopping strategy: Giving is often its own reward, but in 2020, there’s another benefit of donating some cash to qualifying charitable organizations: It can reduce your tax liability.
Tax season is quickly approaching, and while Americans generally have to itemize deductions in order to take advantage of charitable contribution deductions, it’s a little different this year. For the 2020 tax year, you can deduct up to $300 in cash donations as an “above the line” deduction. This means that even if you take the standard deduction instead of itemizing, you can take advantage of this strategy.
“Given the struggles so many people are facing, many Americans will be moved to donate more this year, but if giving is not in your budget, that’s OK, too — you can always get back on track after focusing on your own financial recovery,” Palmer says.
These surveys were conducted online within the United States by The Harris Poll on behalf of NerdWallet from Sept. 17-21, 2020, among 2,049 U.S. adults ages 18 and older, among whom 1,637 plan to purchase gifts for the 2020 holiday season and from Sept. 12-16, 2019, among 2,023 U.S. adults ages 18 and older, among whom 1,785 plan to purchase gifts for the 2019 holiday season. These online surveys are not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodologies, including weighting variables and subgroup sample sizes, please contact Madison Gouveia at [email protected].
“Holiday shoppers” refers to Americans who plan on purchasing any gifts during the 2020 holiday season.
“Holiday season” refers to the period of time between Sept. 17 and the end of 2020.
Total spending, total anticipated credit card charges, the number of Americans still paying for 2019 holiday shopping credit card debt and those planning to shop this year calculated using 2019 population estimates from the U.S. Census.
Credit card payoff estimates assume an interest rate of 15.78% and minimum monthly payments of 3% of the balance or $20, whichever is higher.