Every year around mid-November I start noticing the same pattern in my inbox: one friend is bragging about the designer bag she just snagged for her mom, while another is quietly asking if anyone knows where to find decent toys under twenty bucks. This isn’t just holiday drama. It’s the economy showing its true shape, and this year the divide looks sharper than ever.
I’ve been digging into the latest forecasts, and honestly? The numbers stopped me cold. We’re heading into a holiday season where total spending might actually cross the trillion-dollar mark for the first time—yet almost half of American households are planning to tighten their belts. How does that even add up? Welcome to what everyone’s calling a K-shaped holiday season.
The Two Holiday Seasons Happening Right Now
Picture the letter K. The upper arm keeps climbing—those are the households with rising stock portfolios, remote six-figure jobs, or just enough cushion to shrug off inflation. The lower arm is sliding—families living paycheck to paycheck, watching grocery and gas prices eat whatever wiggle room they once had.
Retail giants are forecasting overall growth between 3.7% and 4.2% this November and December. That sounds cheerful until you realize the gains aren’t spread evenly. A lot of that growth is coming from the top 20-30% of earners who never really stopped spending. Meanwhile, surveys keep showing that roughly four out of ten Americans intend to spend less than they did last year. In some reports, the planned drop is closer to 10% for middle and lower-income shoppers.
Credit Cards Tell the Real Story
Here’s the part that actually keeps me up at night: more people than ever say credit cards will be their go-to payment method this season. We’re talking a jump from 38% last year to 42% planning to swipe plastic for holiday purchases.
Let that settle for a second.
For higher-income cardholders, that’s just smart—pay off the balance, scoop the points, maybe snag a free flight next spring. For everyone else, it’s survival. Roughly six out of ten active card users now carry a revolving balance, and the average interest rate is hovering north of 24%. Do the math on a $1,500 holiday tab, and you’re looking at hundreds in interest alone if minimum payments are all that’s manageable.
“It’s very much a two-track economy, and credit cards are a perfect window into that reality.”
Senior industry analyst at a major credit research firm
Why the Split Feels Wider This Year
A few forces are slamming into household budgets at exactly the wrong moment. Persistent inflation—especially on food and energy—hasn’t fully rolled over yet. Add in uncertainty around new trade policies and tariffs that could push import prices even higher, and plenty of families are deciding it’s smarter to play defense.
On the flip side, the wealth effect is real for upper-income groups. Stock markets have been kind to many portfolios, home equity keeps climbing in most regions, and remote workers often locked in lower living costs during the pandemic. When your 401(k) balance looks like a phone number, dropping an extra grand on gifts doesn’t feel reckless.
- Higher earners: treating holidays like “normal” again—travel, experiences, luxury goods
- Middle and lower earners: hunting deals, shifting to necessities, leaning on buy-now-pay-later plans
- Retailers: chasing the top spenders with premium promotions while discount banners fight for the rest
What the Major Surveys Are Actually Saying
Let’s break down the headline numbers so they stop feeling like noise.
One large retail trade group predicts Americans will spend somewhere between $1.01 and $1.03 trillion this season—yes, trillion with a T. That’s historic. But when consultants surveyed consumers directly, average planned spending per household came in around $1,595—down a solid 10% from last year’s figure. Another study found shoppers expecting to cut gift, travel, and entertainment budgets by about 5% overall.
So who’s right? Both. The aggregate number grows because the top keeps spending more than enough to offset the pullback at the bottom. Classic K-shape in action.
The Psychology Behind the Splurge-vs-Save Divide
I’ve noticed something fascinating over the years: when money feels tight, we don’t all react the same way. Some people double down on frugality. Others—especially if they’ve felt deprived for a few years—decide this is the season to “finally enjoy life again.”
That second group often has the income to back it up now. Remote work, stock gains, or simply climbing the career ladder post-pandemic gave them breathing room. They’re booking the ski trips, upgrading the electronics, and telling themselves the kids deserve something special after a weird couple of years.
Meanwhile, families who never quite recovered—or who got hit harder by inflation—are making hard choices. Trading the big family vacation for a staycation. Switching from name-brand toys to whatever’s on the end-cap. Or worse, quietly putting celebrations on credit and hoping January brings overtime.
How Retailers Are Playing Both Sides
Walk into any major chain these days and you can literally see the K in action. One side of the store pushes premium cookware sets and cashmere sweaters at full price. The other side has rolling racks of clearance and “doorbuster” signage that starts in October.
Smart retailers aren’t picking a lane—they’re building two completely different experiences under the same roof. Luxury beauty counters are busier than ever, while the budget grocery aisles see longer lines. It’s the same company, same quarter, wildly different customers.
What This Means for Your Own Money Decisions
Look, I’m not here to guilt anyone out of holiday joy. If you’ve got the means and paying cash (or points) for gifts and experiences feels good, enjoy it—you’ve earned it.
But if you’re in the group staring at rising balances and shrinking paychecks, give yourself permission to redefine what a “good” holiday looks like. Some of the warmest memories my family talks about cost almost nothing: baking cookies, driving around to see lights, playing board games we already owned.
- Set a firm budget early and treat it like a ceiling, not a target
- Use cash or debit for gifts to avoid surprise January statements
- Shop deals intentionally—Black Friday isn’t the only game in town anymore
- Consider drawing names or setting spending caps for adult gifts
- Focus on experiences over stuff when possible (even a homemade coupon book beats another sweater)
The truth is, nobody on their deathbed wishes they’d bought more gadgets. They remember the people, the laughter, the feeling of being together. Maybe this weird K-shaped season is forcing all of us—top and bottom—to rethink what really matters.
Either way, the data is clear: two very different holiday experiences are unfolding right now. One group is celebrating like 2019 never ended. The other is counting every dollar and praying the credit card bill doesn’t break them. Understanding which track you’re on—and why—might be the most useful financial insight you take into 2026.
Because whatever shape the economy takes next year, the habits we build this December are going to follow us a lot longer than the gifts under the tree.
