“Thrifting” — the habit of spending more to save more — has become a dangerous habit for cash-strapped Americans amid soaring inflation and mounting debt.
Inflation eased in April, however, with the consumer price index rising 3.4% year-on-year.
Despite rising prices, Americans continue to spend.
At that point, credit card debt reached $1.12 trillion in the first quarter, according to the report. From the Federal Reserve Bank of New York.
Retailers are ramping up promotions to combat shrinking profit margins. According to data analytics firm Numerator, temporary price cuts increased 72% between March 2023 and March 2024, while overall promotions increased 15%. Free shipping offers, “buy one, get one free” deals, and minimum order quantities are effective ways for companies to encourage consumers to “save.”
“If you're spending more money because you're focused on the transaction rather than what you're getting out of it, that's a really dangerous thing,” said Charles Chaffin, co-founder of the Financial Psychology Institute.
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The personal savings rate, or the percentage of income people are saving, has fallen as households spend their pandemic savings and stimulus checks.. It was 3.6% in April, down from a record high of 32% set in April 2020, according to the Bureau of Economic Analysis.
“Consumers feel like they have less money than they've ever had before, so they're overreacting to sales,” said Melissa Minkow, director of retail strategy at consulting firm CI&T. “There's a strange mix of variables that's creating this very unique retail environment.”
Saving money isn't necessarily a bad thing, but continued impulse spending without planning can have a devastating impact on consumers' long-term financial goals.
“Basically, if you take on debt that you can't repay, it will affect your credit score and have a major impact on things like your ability to buy a home or finance a larger purchase,” Chaffin said.
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