6 Ways Americans Plan to Pay for Holiday Gifts This Year

As Americans look forward to the holidays, there's one less-cheery concern that often looms: the cost. To manage holiday spending this year, people are planning to buy fewer gifts, shop at discount stores and redeem credit card rewards, among other strategies.

While families prepare for the extra costs that come with celebrating the holiday season, concerns about tight budgets and the risk of overspending are prevalent. Consumers say they expect to spend just over $900 per person on holiday gifts, decorations and food this year, which is an increase of $25 from 2023, according to a new survey by the National Retail Foundation.

Meanwhile, nearly half of adults say they're living paycheck to paycheck, and 55% are worried about the rising cost of the holidays, according to a separate survey out Thursday from Thrivent.

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Companies like Target are trying to cater to budget-conscious holiday shoppers. The mega-retailer just cut prices on 2,000 items, and it's promoting a larger selection of gifts under $20 this season. Online retailers with competitive pricing and discount stores are expected to see a bump in overall holiday spending, while households also continue to turn to new financing options to fund gifts for their loved ones.

Here's how Americans say they're planning to afford the holidays:

Shopping at discount stores

Nearly 6 in 10 consumers consumers intend to do more of their holiday shopping at discount stores compared to last year, according to new research from Bank of America.

"That way they'll get more out of their money, and it'll enable them to cover more of their holiday shopping without sacrificing the gifts they want to get," Mary Hines Droesch, a head of banking products at the company, said in a presentation of the research.

The bank's customers plan to shop from a variety of types of discount retailers, including wholesalers and big box stores (54%), dollar stores (39%), discount department stores (37%) and outlet malls (21%).

Purchasing fewer — or less expensive — gifts

Cutting back on gifting is the simplest way to save money, but it's never an easy decision for families, especially those with children. Thrivent's survey research shows many households do plan to put their finances first this year, with 33% of respondents reporting they'll buy cheaper gifts and 31% saying they'll buy fewer gifts.

Buying now, paying later

A September report from Adobe Analytics forecasted that Buy Now, Pay Later (BNPL) spending would increase 11.4% over last holiday season.

Payment options through third party services like Klarna and Affirm can give consumers extra time to come up with the funds for a purchase, and you can usually avoid most fees with if you pay four installments spread out two weeks apart. However, using buy now, pay later for longer term financing can get quickly get expensive, and relying on BNPL too much can damage your credit.

Before using any BNPL service, make sure you know how much interest you'll owe and consider how it may affect your overall credit.

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Thrift finds and DIY gifts

While some holiday gift givers prefer the convenience of gift cards or cold hard cash, you can also give a thoughtful gift without spending much money.

Droesch suggests making do-it-yourself gifts like photo albums, while the Thrivent report notes that many Gen Zers plan to shop at thrift stores for affordable (and sustainable) gifts. And not just physical shops: Online thrift stores on apps like Depop and Poshmark have surged in popularity among younger generations for their convenience and large inventories of curated clothing.

Redeeming credit card rewards

According to Bank of America, 40% of its customers intend to use credit card rewards to pay for all or part of their holiday shopping. The bank says it expects to see an uptick in reward redemptions at Amazon and PayPal checkouts.

Using credit card rewards to pay for holiday gifts can be an effective strategy to keep your card balances down, but remember that your rewards are valuable. You should always compare your available redemption options to see which one will stretch your hard-earned points the farthest.

Taking on debt

While many of the strategies above can help consumers budget for the holidays, taking on debt is a last resort. Morning Consult research shows that 1 in 5 shoppers expect to take on debt this season.

It often takes over a year to pay off holiday credit card debt, which means overspending now could dampen next year's celebrations.

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