Only one group of surveyed shoppers feels they have the financial flexibility to spend cash on holiday shopping without incurring debt. However, even within this group, a significant portion expects to face challenges.
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According to Morning Consult, a survey research firm, more than half—52%—of shoppers earning $100,000 or more believe they can "easily afford" their holiday expenses in 2024. This percentage is the highest among all income brackets surveyed.
By comparison, about 33% of respondents with annual incomes ranging from $50,000 to $99,900 said they feel capable of handling holiday expenses. Meanwhile, only 18% of those earning under $50,000 reported confidence in managing holiday costs. This survey, conducted between August and September, polled 2,201 U.S. adults.
Experts say this disparity in confidence can be traced back to the ongoing struggles that many households face with inflation.
“Inflation is like a regressive tax,” said Sofia Baig, an economist at Morning Consult. “It affects lower-income individuals more intensely than higher-income people because it takes up a larger portion of their disposable income.”
Holiday debt, in turn, can become a prolonged issue. If using cash for holiday spending seems difficult, you’re certainly not alone. According to Morning Consult, approximately 20% of Americans surveyed expect they will need to take on debt to afford holiday celebrations and obligations this year.
For those planning to use credit cards to cover holiday expenses, it’s important to recognize the potentially long-lasting nature of this type of debt. A survey by NerdWallet, conducted in September among 2,079 adults, found that 28% of holiday shoppers in 2023 are still repaying debt from nearly a year ago.
“Credit cards carry extremely high interest rates,” noted Sara Rathner, a credit card expert at NerdWallet.
According to Bankrate.com, the average annual percentage rate (APR) for credit cards stands at around 20.50%, down slightly from a record 20.79% in August. In comparison, retail credit cards carry even higher average rates, at 30.45%, which Bankrate highlights as significant.
“If you’re only making minimum payments on that debt, it’s quite possible to remain in credit card debt for an extended period,” Rathner explained.
Higher earners, however, have more financial “wiggle room.” As pandemic-era lockdowns lifted, increased income equality arose due to a labor market favorable to workers, combined with the fact that many still had saved COVID-19 stimulus payments, Baig observed.
During the pandemic, U.S. households collectively received over 476 million payments, amounting to $814 billion in financial relief, according to government data. But with recent years bringing an accelerated increase in inflation, these pandemic savings began to erode quickly, Baig added.
High-income households, however, were less impacted by inflation, while lower-income families felt a greater financial strain on everyday expenses.
“Higher-income consumers are much less sensitive to price changes,” said Stacy Francis, president and CEO of Francis Financial, a New York City-based firm specializing in wealth management, financial planning, and divorce financial planning. Francis, a member of CNBC’s Financial Advisor Council, added, “They’re not nearly as budget-conscious as those in lower income brackets.”
According to Baig, high earners are also “more insulated from the hardships of inflation,” as they generally have a greater degree of flexibility within their budgets, allowing for both saving and spending.
A separate report by Morning Consult found that 68% of respondents with incomes of $100,000 or more could cover three months or more of essential expenses without any income, a slight increase from 65% in 2023. Their higher savings balances, combined with substantial incomes, enable them to spend on retail and travel this holiday season with more ease.
“This isn’t the case for low- and middle-income consumers,” Baig noted.
For instance, only 47% of those with incomes between $50,000 and $99,000 reported having enough savings to cover three months’ expenses, while a mere 22% of earners making under $50,000 felt similarly prepared.
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