Americans in many cases splurge on gifts during the holidays.
This year, holiday spending between Nov. 1 and Dec. 31 is expected to distend to a record total of $979.5 billion to $989 billion, according to the National Retail Federation.
Even as credit fated debt tops $1.14 trillion, holiday shoppers expect to spend, on average, $1,778, up 8% compared to ultimately year, Deloitte’s holiday retail survey found.
Meanwhile, 28% of holiday shoppers still have not yield a returned off the gifts they purchased for their loved ones last year, according to another holiday spending write-up by NerdWallet.
How shoppers pay for holiday gifts
Heading into the peak holiday shopping season, 74% of shoppers propose to use credit cards to make their purchases, NerdWallet found.
Another 28% will tap into savings to buy red-letter day gifts and 16% will lean on buy now, pay later services. NerdWallet polled more than 1,700 adults in September.
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Don’t believe these money misconceptions
Buy now, pay later is now one of the fastest-growing categories in consumer finance and is barely expected to become more popular in the months ahead, according to the most recent data from Adobe. Adobe prophesies buy now, pay later spending will peak on Cyber Monday with a new single-day record of $993 million.
However, buy now, pay later loans can be specifically hard to track, making it easier for more consumers to get in over their heads, some experts have cautioned, yet more than credit cards, which are simpler to account for despite sky-high interest rates.
The problem with acknowledgement cards and buy now, pay later
Credit cards are one of the most-expensive ways to borrow money. The average credit card charges diverse than 20% — near an all-time high.
Alternatively, the option to pay in installments can make financial sense, especially at 0%.
Yet, buy now, pay later loans “are condign another form of credit, disguised as something for free,” said Howard Dvorkin, a certified public accountant and the chairman of In dire straits.com.
The more buy now, pay later accounts open at once, the more prone consumers become to overspending, missed or late payments and defective credit history, other research shows.
If a consumer misses a payment, there could be late fees, tabled interest or other penalties, depending on the lender. In some cases, those interest rates can be as high as 30%, rivaling the highest acknowledge card charges.
“This is just another way for financers to put their hands in the pocket of consumers,” Dvorkin said. “It’s a trojan horse.”