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Free shipping offers could increase holiday spending

Oct 23, 2013 Philip Burgess

As Christmas, Hanukah and other holidays approach, Americans tend to spend more money as they purchase gifts for their friends and family members. With many retailers offering free shipping this year, expenditures may increase - potentially putting people in a bad position when January arrives.

When spending picks up, consumers are more at risk financially if an unexpected expense arises, as they may fall short on other essentials and incur late fees and penalties. To prevent such an instance, short term lending can be utilized.

Free shipping is a major draw for holiday shoppers, and more and more retailers are offering it early on in the season. In fact, reported 16.3 percent of stores will have this incentive by the week of October 28. Year-round free shipping is available at more than one-third of retailers, up from 23.1 percent last year. Consumers may also be drawn in by other promotions that are expected to be rolled out at the majority of online merchants by Halloween.

"Retailers have been preparing for holiday for months, smartly investing in what's important to online shoppers: value, free shipping, a user-friendly site and flexible returns, among other features," said Executive Director Vicki Cantrell. "Retailers understand that holiday shoppers also look for merchandise selection and quality, and have boosted inventory to offer ample selection and exclusive products to help customers find just the right gift for everyone on their list."

Holiday spending expected to pick up
It appears as though the additional retailers offering free shipping may be impacting spending this year, as Americans are expected to dish out more money on gifts. According to the Deloitte holiday forecast, sales are projected to rise 4 to 4.5 percent with the total reaching between $963 billion and $967 billion.

"Rising home prices with steady job creation may buoy consumers' confidence in the economy and create a wealth effect," said Daniel Bachman, Deloitte's senior U.S. economist. "The debt ceiling and budget debate will resume this fall alongside uncertainty about the implementation of health care reform, which may cause some concern among consumers, but at a macro level, these factors are unlikely to have a significant effect on the economy and retail sales."

Consumers are expected to spend more money at "non-store" establishments as well, which include catalogs and interactive TV. The jump is projected to be between 12.5 and 13 percent.

Allison Paul, vice chairman of Deloitte LLP, said non-store sales growth will continue to be higher than overall retail sales growth.

Short term lending could prove beneficial to many
The holiday season brings joy and togetherness, as people purchase gifts and spend time with their family. But, as January arrives, consumers may find this happiness is gone as they could be at higher risk of financial troubles.

Americans who overextended themselves during the holiday season could be crippled by an unexpected expense. For example, someone who tapped into their savings to buy presents might fall short on essentials if surprise costs, such as a blown transmission, occurs, which can result in costly late fees on missed bills.

However, there is a way to avoid trouble - short term lending. Instead of falling short on essentials, consumers can utilize this form of lending to receive funds quick and stay current on all bills.

In recent months, short term lending has come under fire due to high fees and rates. But, the costs incurred to obtain such a loan is often less than what would be charged if a payment is missed, so it can be beneficial for Americans.