The Psychology of Holiday Shopping: 8 Common Traps to Avoid

Have you ever wondered why the winter holiday season, one of the happiest and most festive times of the year, can also be one of the most stressful? While the pressure of hosting parties, traveling, and food preparation are factors, a big reason for December angst is the stress of holiday shopping. 

Unfortunately, retailers understand the gift-giving pressure shoppers are under and use this to their advantage. Holiday shopping can be exciting, but it’s important to be aware of these common tactics to avoid overspending. 

1. Flash sales (and the power of scarcity) 

The “flash sale” is a tactic stores use to make you think that if you don’t buy something right now, you’ll miss your opportunity. Common signs of flash sales include phrases like “limited-time offer,” “last change,” “only a few left,” and “going out of stock soon.” In most cases, the item in question isn’t actually in limited supply. 

Tip: The best way to avoid falling for a flash sale is to consciously decide to avoid impulsive purchases. Go into each store with a plan for what you will buy, and don’t deviate. If you’re tempted to buy a big-dollar item impulsively, walk away and give yourself 24 hours to think about it before making the purchase. 

2. Emotional spending 

For many of us who grew up celebrating it, Christmas is one of the most nostalgic and emotional holidays of the year. Retailers understand this better than anyone. 

Everything stores do — from the scents to the music to the decorative lighting — is designed to trigger your emotions. They understand if they can get you feeling nostalgic, generous, and emotional enough, you’re more prone to spending money based on your feelings. 

Tip: Be aware of this tactic when you enter a store and stick to your shopping list. When you know the environment is designed to promote emotional spending, you’re less prone to give in. 

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3. Guilt-driven shopping 

In addition to emotional spending, stores also try to promote guilt-driven shopping. For instance, they may run advertisements implying that your kids or spouse will be unhappy unless you purchase a specific (and often expensive) gift for them. 

Or they’ll make you believe everyone else is spending lavishly for the holidays, and you should too — otherwise, you don’t care about your friends and family as much as everyone else. This is designed to make you feel like you have to overspend on your loved ones. 

Tip: As with emotional spending, you can avoid guilty spending by being aware and arming yourself with a shopping list. You could also remove the financial aspect from gift-giving altogether and focus instead on thoughtful gifts and gestures. 

4. The illusion of savings 

Perhaps the biggest mind game retailers play on customers is making them think they’re saving money when they aren’t. Here’s how it works: 

1. Stores increase prices on certain items ahead of the holiday shopping season. 
2. As Christmas draws nearer, they gradually decrease those prices. 
3. The stores will advertise these items as 10% off, 20% off, 30% off, and so on. 

Retailers use this tactic to make you think you’re saving money by buying an item at a discounted price. In reality, you’re paying full price for the item, if not slightly more. The “discounted” price is rarely (if ever) lower than the item's original price before the shopping season. 

Tip: As a rule, you should assume items are being sold at full price, even if they’re “marked down.” 

5. Free shipping and bundled deals 

Another common trick is promising free shipping when you spend a certain amount. Some retailers may even promise discounts if you purchase multiple items at once. While free shipping and bundled deals are sometimes worth it, you usually overspend on things you don’t need. 

For example, Costco offers free shipping on purchases of $150 or more. If your initial purchase costs $80, you may be tempted to buy more to reach that $150 threshold and get free shipping. In reality, you’d keep more money in your pocket by paying to ship the $80 purchase. 

Tip: If you really want free shipping or a bundle deal, consider splitting the order with a friend or family member. That way, everyone gets what they need, and you still get your discount! 

6. FOMO (fear of missing out) 

FOMO, a.k.a. the “Fear of Missing Out,” is a common struggle for millions of Americans. People often worry that if they don’t buy the newest model of a product, they’ll regret it later when they see everyone else enjoying one. 

Stores understand the power of FOMO and leverage it during the holiday shopping season by using the power of persuasion. 

For example, a wireless carrier might run an advertisement showing dozens of happy people with a new iPhone, making you feel like you’re missing out if you don’t have one, too. Another FOMO tactic is to show statistics of how many people have bought a specific item, so you feel like you’re in the minority if you don’t join them. 

Tip: There are several ways to avoid falling into the FOMO trap of holiday spending. First, be okay with not having what everyone else has. Second, remember that a better deal might be right around the corner, and you don’t have to make impulsive purchases to be happy. 

7. Buy now, pay later 

If you’re on a tight holiday budget this year, the option to buy something now and pay for it later is highly tempting. Buy now, pay later (BNPL) is a service that many stores and cash services have started offering — and it encourages overspending. 

Why? Because you pay less up front and your purchases feel smaller and more manageable, you falsely might think you can afford them. 

Tip: The downside of BNPL services is the added interest and possible late fees if you miss a payment. You should only use BNPL for essential or pre-planned purchases and calculate the actual cost before committing. 

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8. Retail rewards 

Similar to bundling or free shipping schemes, retailers often use reward systems and loyalty programs to encourage overspending. This happens because you need to spend a certain amount of dollars to earn discounts. Often, the extra amount of money you spend doesn’t justify the rewards you earn. 

Tip: While retail rewards can cause overspending, they can also be a powerful money-saving tool if you sign up for rewards programs at stores you frequent outside of the holiday season. Just be sure to set boundaries to prevent yourself from overspending to earn points. 

Keep your budget on track this holiday season 

The holidays are a time for celebration, but it’s easy to get caught up in the excitement and overspend. Retailers know how to make every deal look tempting, but with a little planning, you can stay in control of your holiday spending. Start by creating a budget and a shopping list that fits your needs — and stick to it. This way, you’ll avoid falling for promotions that don’t really save you money, and you’ll have peace of mind knowing you’ve planned for all your holiday expenses!