Survey Finds 42% of Americans Avoided Large Purchases Last Year
Last year proved to be a financial anomaly in many ways — evidenced by a number of dichotomies that emerged. While the loss of employment and other economic issues impacted many Americans, on the whole, consumers saw increased savings rates and credit card payoffs. Now a new survey from WalletHub looks at one potential reason why these latter side effects were possible: many consumers avoided large purchases in 2020.
In the survey, 42% of respondents said they did not make any large purchases last year because of the pandemic. Nevertheless, the number of people who reported maxing out a credit card in the past year increased by 28%.
As for how most people define the term “large purchase,” the most popular answer in WalletHub’s survey was “over $100,” with 30% of respondents offering that definition. However, 28% said they considered “large” to mean over $250 with another 24% saying it was over $500. Finally, 18% stated that purchases over $1,000 are what they’d call large.
When it comes to actually making these large purchases, the majority of those surveyed stated that they prefer using a credit card — with 55% saying as much. Specifically, 48% of those who opt for credit explained they do so because they want to earn rewards, while 24% named it as the quickest and easiest option. However, among the 32% of respondents who preferred debit cards, 38% believed them to be the easiest option. Additionally, 54% of debit card users noted that they preferred this option as it helped them avoid credit card debt. The results were similar for the 10% who swore by cash for large purchases, with 53% doing so as a means of staying out of credit card debt.
In addition to several respondents stating they were worried about racking up credit card debt, many also had concerns about maxing out their credit cards. For those individuals, WalletHub analyst Jill Gonzalez advises, “The key to worrying less about having enough spending power to make a big purchase is to carefully manage your available credit. It’s important to keep a close watch on your balance so that you are always aware of what you have already spent. People who do this will be less likely to max out their cards or overspend in general.” Gonzalez also offered a tip for those looking to manage large purchases, noting, “Another good habit is to pay your credit card bill several times a month, especially when you are planning to make a large purchase. That way, you will have more of your credit line available at any given time. In addition, if you have a history of paying your monthly credit card bill on time and using a small percentage of your credit, you may want to ask your issuer for a credit limit increase.”
Even though credit cards may be rewarding for some, the fact is that they still frighten many Americans — and for good reason. In fact, the abrupt economic swing seen in 2020 shows that it’s important to be financially prepared. With that in mind, if you’re looking to make a large purchase, make sure you have a sustainable pay-off plan in place so that you can avoid holding onto credit card debt longer than you have to.