The holiday shopping season is over now, and many Americans are seeing the impact on their credit card bills and bank statements. Even before the holiday season, though, the COVID-19 pandemic already wreaked havoc on people’s wallets, forcing them to reevaluate how much they were able to spend. In a nationally representative survey conducted by WalletHub, 42% of respondents said they did not make a large purchase last year due to COVID-19.
Different people have been impacted to different degrees due to the pandemic, though. People with high incomes and stable employment may have no trouble putting large purchases on a credit card, reaping rewards, and paying them off quickly. It’s a different story for Americans with less stable incomes, though, especially the millions who have become unemployed because of COVID-19. When it comes to non-essential large purchases, they may be better off saving up and paying in cash. “If they don’t pay bills monthly and carry a balance with a high interest rate, relying on cash is a good discipline,” says David Laibson, a professor of economics at Harvard University.
Below are some more of highlights of WalletHub’s survey, along with additional insight from a panel of experts.
- 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.
Ask the Experts
Different people have different preferences on how to pay for large purchases. But how much of an impact do these preferences actually have on consumers, and are some payment methods objectively better? To gain further insight, we posed the following questions to a panel of experts. Click on the experts’ profiles to read their bios and responses.
- Why do so many people fear maxing out their credit cards when making large purchases, and what advice do you have for shoppers with such concerns?
- Do you think there is a correlation between gender and maxing out credit cards?
- Is it natural for people's definition of a "large" purchase to change over time?
Ask the Experts
WalletHub conducted this nationally representative survey with over 1,000 respondents from 01/11/21 to 01/15/21. We weighted the statistical results to correct for demographic discrepancies. The margin of error for the total respondents is plus or minus 3% at a confidence level of 95%.
Full Details Overall
|What do you consider a large purchase?|
|What is your preferred payment method for large purchases?|
|What’s your main motivation for using your preferred payment method for large purchases?|
|Avoiding credit card debt||26%|
|Can pay off over time||12%|
|Do you worry about maxing out your card or overdrafting your account when making a large purchase?|
|Have you ever maxed out a credit card after making a large purchase?|
|Yes, more than once||13%|
|Do you have to check with anyone else (spouse, partner, parent, etc.) before making a large purchase?|
|Do you spend more time planning for a large purchase or paying it off?|
|Paying it off||34%|
|Did COVID-19 prevent you from making a large purchase in 2020?|
|No, COVID did not prevent me from making a large purchase||58%|
|Yes, COVID did prevent me from making a large purchase||42%|
Note: Percentages may not total 100% due to rounding.