Shoppers to Spend Less This Holiday Season

By Beverly Harzog on 17 December 2012 (Updated 8 July 2014) 6 comments

One of my favorite holiday songs is “It’s the Most Wonderful Time of the Year.” But I’ll admit that during some points of the season, I feel like changing the words to “It’s the Most Stressful Time of the Year.”

And it’s not just because you have to attend company parties, find time to decorate the house, or compliment your Aunt Sara’s cranberry nut dessert (even though you can’t stand it). No, there’s something else that can really make your blood pressure rise.

You know what I’m talking about — it’s the heart palpitations that accompany spending so much money in a short period of time. Way too many people end up with a debt hangover in January. (See also: Dealing With Post-Holiday Credit Card Debt)

But it looks like this is the year that many have decided to throw up their hands and say, Enough already! We can spend less and still enjoy the holidays. According to a survey by myFICO, almost one third of consumers are decreasing their holiday budgets and keeping low balances on their credit cards.

The myFICO survey highlights some credit-card strategies that consumers are trying this holiday season. Maybe you’ll see an idea that will help you put the brakes on credit-card spending this season.

Sticking With Their Current Credit Cards

Only 20% of shoppers plan to open a new credit card account. Now, this doesn’t necessarily mean that consumers have enough credit. I suspect this has to do with not wanting the temptation to spend more.

And this makes sense. If you’re on a diet and you don’t want to eat a giant plate of lasagna, then don’t go to an Italian restaurant where you’ll be tempted to order it.

Same with credit cards. Don’t tempt yourself with a new card if you know you’ll be tempted to spend more. Really, unless you need a specific type of card, like a rewards card that offers miles, there’s no reason to open a new account.

But I also think that people are sticking with the credit cards they have because it’s easy. You know the interest rate, your credit limit, and how the rewards program works. If you put a brand-new card into your rotation right now, it’s just more stuff to keep track of. And when you have more stuff to keep track of, it’s stressful. And during the holidays, who needs more stress?

Spending Less on Credit Cards

I already mentioned that almost a third of consumers say they’re spending less this year. But would you believe that a whopping 65% plan to spend less than $500 on their credit cards? That’s pretty significant, because the American Research Group predicted that the average consumer will spend $854 during the 2012 season.

I haven’t done any scientific research on this, but I spend a lot of my time talking with consumers. I think one reason so many folks are cutting back is because we’re all becoming more skeptical about what the economy has in store. The Great Recession spooked everyone, whether you got your credit trashed or not during that time.

There’s nothing wrong with some healthy skepticism. We no longer believe that the economy will bounce back strong until we see it. This is just self-preservation, and it’s really pretty healthy. When the economy does bounce back, those who aren’t in debt can take advantage of opportunities. So really, it’s fantastic to see people making tough decisions about spending less.

Watching the Score

In the survey, 14% said they’re worried about the impact of holiday spending on their FICO score. I think this is another effect of the recession. Three years ago, not that many people spent time thinking about their FICO score.

The survey also says that consumers plan to use only 25% of their limit. This is a good strategy because the lower your credit card balances, the better your FICO score. In fact, if you want to maximize this part of your FICO score, don’t use more than 10% of your credit card limit. Yes, I know that’s hard to pull off during the holidays!

But honestly, I don’t think anyone needs to actually “worry” about their scores. Be concerned, but don’t obsess over it, because scores are a moving target. They change frequently based on what’s being reported and when it’s being reported. As long as you pay the full balance when the bill comes, the impact on your score will be temporary.

However, if you’re planning to refinance your mortgage or get a personal loan very soon, then yes, it’s a good idea to keep those balances very low.

Are You Spending Less This Year?

I’m a little ahead of the curve on this issue. I cut back on the amount of holiday spending a few years ago. Not because I’m a financial genius, but because I have a daughter in college and my son is starting college in two years. My goodness, education is expensive!

So we’ve already made a tough decision about holiday spending cuts. I do use my rewards credit cards for all of my holiday purchases. I like to get cash back or miles on my purchases. It’s a small way to save a little on the purchase price.

OK, so how about you? Have you decided to make any changes when it comes to spending or credit cards this year?

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Guest's picture

I think its really dumb to go into credit card debt for the holidays. The people you buy gifts for are your loved ones anyway, and I'm sure they'd understand you spending less money in times like these. In the past couple of years, my family has decided to do a secret santa instead of everyone getting gifts for everyone. Its saved us all a lot of money and stress.

Beverly Harzog's picture

Hi Kelly -- I totally agree with you that going into credit card debt for the holidays is not worth it. And I love your Secret Santa idea. I'm for anything that saves money and lowers my stress level!

Guest's picture
Guest

I am unemployed this year,but fortunately I participated in an online community that gives me amazon cards. I was able to do 90% of my shopping with these cards. I feel pretty good and I was able to get a name from the giving tree at my Walmart. I made some kid a better holiday too. It is amazing what we can accomplish frugally.

Beverly Harzog's picture

I'm so sorry you're unemployed, but I sure do admire your attitude. You're so right that we can do a lot without spending a fortune. And your generosity will put a big smile on a little kid's face this holiday season. Happy holidays to you and I hope 2013 brings employment your way.

Guest's picture
JennXer

I spent more this year, but budgeted it due to an "extra" paycheck in September and some well-earned overtime. :)

Beverly Harzog's picture

Hi Jennxer -- I think that's awesome you got an extra paycheck and used it for the holidays. As long as it's money you have, especially when you work hard for overtime, it's money well spent. I hope you're having a great holiday!