Borrow Debt

Consumers Are Spending More — But Are We Paying For Things The “Smart” Way? 

Kathryn Tuggle  |  November 27, 2023

How are you financing your life this holiday season? What about in 2024? 

Note: This post is sponsored by Citizens Pay.

While it’s been a bit of a rocky year for the economy, one thing’s for sure – Americans are spending. Consumer spending reached an all-time high of $15.34 trillion in the second quarter of 2023, and grew 5% year over year from June of 2022 to June of 2023. 

And while we love the fact that all this consumer spending is one of the things helping to keep a recession at bay, we’re a bit more wary of some other all-time highs we’ve just reached — with debt. U.S. household debt just hit a frightening new milestone of $17.06 trillion at the same time credit card balances surpassed $1 trillion. This is especially concerning given that credit card interest rates now stand at near-record highs… 

READ MORE: Are You Getting The Best Interest Rate You Can? How To Finance Your Life 

So, what’s a savvy consumer to do? HerMoney CEO Jean Chatzky sat down with Christine Roberts, President of Citizens Pay, to find out. You can listen to their full conversation, or check out some of our favorite parts of their discussion here:  

Question from Jean Chatzky, CEO of HerMoney: What are you hearing from consumers this year? Holding up really nicely from an economic perspective, yet debt is also on the rise.

Answer from Christine Roberts, President of Citizens Pay: I think what’s interesting is, we have finally seen the runoff of the stimulus money that was put in consumers’ hands during the pandemic. It was great that the government was able to help support families during that time, and that allowed them to use less credit, and still be able to do the things that they needed to do. But now folks are back to spending habits that they had pre-pandemic. The upside though, is there’s more choice available today when they do need to make large purchases. 

Jean Chatzky: When we are looking at large purchases that we know we are going to have to pay for in chunks (because there’s just no way to fit a new couch, new fridge, or a repair into our budget in a single month!) how should we be thinking about the math here and evaluating what goes on a credit card, vs. what goes on a debit card, vs. what goes in the 0% longer-term financing? 

Christine Roberts: The way we have been looking at it with consumers is to say: Your everyday purchases, like groceries, gas, things that are quickly paid off, are better on a debit or credit card. If you have cash in-hand, you should be working with cash-in-hand. If not, get your points — your benefits from your credit card — but do it in a way that you can pay it off quickly, so you’re not racking up extraordinary amounts of interest. Second, traditional buy now, pay later — or pay-in-four — plans are good if you’re trying to make a less-than-$200 purchase of something that you want or need, but it fits within your budget to pay it off in a short period of time. Just make sure you’re using it in a conservative way. [Because yes, there are hidden risks!]

Then you’ve got your store cards that you can use if you’re loyal in a particular place. If you’ve got home improvement cards, for example, those are great because you can either get a discount, or they do 0% financing. The caution on those is they are known as a “deferred interest” card. Let’s say they offer you 12 months of 0% financing… If you don’t pay off that charge in the 12 months, all of the interest that you would have accrued during that 12 months gets put onto the card. That is considered a deferred interest vehicle, and it catches so many people off guard. And it’s something, by the way, we don’t do — if we tell you it’s 0%, it’s really 0%. 

And then look at your larger purchases — anything from $500 or more — and really try to find a 0% or low-interest deal. We have some of our merchants that are doing a 4.99% rate, which is still better than a 29.99% credit card, right? And it also allows you to manage your payments. The upside to  pay-over-time financing is knowing how much you’re going to pay per month, how much interest you’re going to pay during that period of time, and when you’re done paying. And I think that’s the key: Being able to look at budget and set yourself up successfully to know: I’m taking a 12 month loan, I’m going to pay for my $1,200 couch over 12 months, this is the fee that I’m going to pay for it, and here’s when I’m finished. 

Jean Chatzky: It’s a little more like a car loan, right? You know that in 36 months, you’re done. Are there other big differences between buy now pay later and the pay-over-time financing that Citizens Pay offers?

Christine Roberts: We do some things very differently. Our 0% is truly 0%. We don’t do deferred interest, so that you know exactly what you’re going to pay for the term that you have agreed to. Our products today are locked to a particular merchant, so if you go to Best Buy and you join the Upgrade+ Program, all of the Apple products that you buy at Best Buy through the Upgrade+ Program can only be purchased at Best Buy. We liken our programs to partnerships more than anything. We are truly looking at partnerships with merchants that are offering services and products to consumers where financing is necessary. The other thing that’s different for us is our product is a line of credit vs. a closed-end loan. [Buy now, pay later programs are all closed-end-loans, which means they are one-and-done]. But if you go in to join the Upgrade+ Program at Best Buy, we will approve you for a line of credit. And as you pay down within our programs, then your open-to-buy comes back up.

Jean Chatzky: It’s a very complicated landscape with a lot of different terminology! We are up against the holidays… Any good rules of thumb for sticking to your budget and avoiding missing payments?

Christine Roberts: To me, it always comes down to planning, Avoid the urge, right? If you’re out shopping for particular gifts, stick with what you thought you were going to buy, and avoid the urge to overspend. For holiday shopping, have a very tight list of what it is that you’re going to buy, and how much you’re going to spend. And then, have a plan for when you want to pay it off, so that you’re not falling into the trap of putting things on a high-interest credit card, and it’s going to take you twice as long to pay it off, vs. shopping smart with some of the other types of financing that are available.


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