Around 42% of Americans did not make a large purchase last year due to COVID-19, according to a new WalletHub credit cards survey. The pandemic has left millions of people unemployed globally and has forced people to re-evaluate how much they can afford to spend.
Understanding consumers’ attitudes and choices regarding large purchases is particularly important at this time of the year, with bills from holiday shopping coming due and Valentine’s Day looming large. The definition of a ‘large’ purchase varies across different demographics, but the biggest share of people, at around 30%, consider it to be anything over $100.
“Due to the COVID-19 pandemic, around 42% of Americans have not made a large purchase in the past year. This makes sense considering the fact that the pandemic forced many people out of a job, and the unemployment rate currently sits at 6.7%,” said Jill Gonzalez, WalletHub analyst. “People in the low- and middle-income brackets were prevented from making large purchases at similar rates (around 49% and 46%, respectively), while only 28% of high-income individuals had to forgo large purchases.”
Key findings from the report include:
- Maxing out is worrisome – 91 Million Americans fear maxing out their credit cards on large purchases.
- Men max out more – Women are about 7% less likely than men to have maxed out a card at least once.
- Age shapes our definition of “large” – Millennials are almost twice as likely as Baby Boomers to choose “over $100” as the benchmark for a large purchase.
- Spending permission needed – Nearly half of Americans have to check with someone else before making a large purchase.
“Approximately 91 million Americans are worried about maxing out their credit card on a large purchase, so it’s a common concern. It’s good to have a healthy amount of concern, though, as the COVID-19 pandemic has put many people in a difficult financial position and left millions unemployed. Before making large purchases, people should consider how essential those purchases are and whether they can really afford to spend that much,” said Gonzalez.
“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. 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.”