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Retail therapy barely conceals the anxieties of voters in the face of presidential election – and their wallets know it.
About 27% of buyers surveyed say they are “catastrophic expenses“- that is, spending money despite concerns about the economy and foreign affairs – according to a new Intuit Credit Karma report. This habit is more prevalent among younger generations, with 37% of Gen Zers and 39% of Millennials saying they do it.
More than half, or 60%, of Americans surveyed are concerned about the state of the world and the economy, more than a year ago. The site surveyed 1,001 American adults in late October.
Top concerns among spenders include the cost of living (55%), inflation (43%) and the presidential election (28%), according to the report.
More than a third, or 36%, of people surveyed say they can’t streamline savings because of a feeling of uncertainty about the world and the economy, according to Intuit Credit Karma. This increases to 47% of Generation Z and 43% of Millennials.
Buyers want a “sense of control”
Shoppers may be looking for “a sense of control, especially in a time when it seems like so much is out of your control,” said Courtney Alev, consumer finance advocate at Credit Karma.
“Catastrophic spending” affects young people the most because they are “chronically online” or spend a lot of time on the internet and social media, Alev said.
At this point, 70% of Gen Zers and 52% of millennials consider themselves “chronically online,” Credit Karma found.
“If you’re already reading online about everything that’s going on in the world, it’s more likely that you’re really stressed out and then looking for those coping mechanisms,” Alev said.
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Shoppers who report making impulse purchases on social media spent an average of $754 over the course of a year, according to to a 2023 Bankrate.com survey.
In a way, the urge was “born out of the pandemic,” said Ted Rossman, senior industry analyst at Bankrate.
This trend is especially common among younger buyers who may feel like “the dice are stacked against them,” he said.
Young adults“Finances could be hampered by student loan balancesand they find it increasingly unaffordable to buy a houseeven less to rent out their own place, Rossman said.
“It’s a difficult cycle to break.”
Catastrophic spending can lead to more serious financial problems. Credit card balances reached $1.14 trillion in the second quarter of 2024, according to at the Federal Reserve Bank of New York.
As of June, 50% of cardholders carried a monthly balance on their credit card, according to a recent Bankrate survey.
“The proportion of those paying in full today is actually the lowest it’s been in four years,” Rossman said.
Cardholders also carry the debt longer. About six in 10 people who have credit card debt have had it for at least a year, Bankrate found.
“It’s a tough cycle to break,” Rossman said, especially since interest rates remain quite high for mainstream credit cards.
The average annual rate for credit cards is about 20.50%, down from a record high of 20.79% reached in August. according to at Bankrate.com. The average APR for retail credit cards is 30.45%, a high discount rate. find.
Election-related spending disasters also come just before the busy holiday shopping season. According to Morning Consult, about 20% of Americans plan to take on credit card debt this holiday season to pay for celebrations and obligations.
Credit card balances can be very sticky. About 28% of 2023 holiday shoppers are I always repay my debts they faced last year, NerdWallet found after surveying 2,079 adults in September.
“Credit card debt is growing at the fastest rate among Gen Z and millennials,” Alev said.
Credit card balances have increased 66% for Gen Z and 52% for millennials since March 2022, when the Fed began raising interest rates, Alev said, citing data from members of Credit Karma.
The more debt you get, the harder it will be to save money, she said.
“We see that these two things come together and affect the lives of many young consumers in a very negative way,” Alev said.
“Take back control”
“Sometimes when people feel the most anxious is when they simply have no control,” Rossman said. “You can take back control by making a plan.”
If you know you’ll be tempted to spend money, make room in your budget for such purchases, Rossman said.
“Put the money aside in advance,” he said. “Just eliminate the impulse.
Ideally, put the money in a separate high-yield savings account to get a better return, Rossman said.
