How the Pandemic Shaped Holiday Spending in 2020 and its Ripple Effects in 2021: A Conversation with LendingTree’s Matt Schulz

By Lance Pierce

In a recent post we highlighted how the COVID-19 pandemic affected holiday spending in 2020, bringing debt to a 6-year-high, according to a new survey conducted by MagnifyMoney, an affiliate of Lending Tree

Now we talk with Matt Schulz——a nationally-recognized credit expert who’s appeared on CBS Evening News, The Today Show, CNBC-TV, Fox Business Network and more—about the survey, along with his financial predictions for what 2021 will look like regarding the pandemic. As the current chief credit analyst at Lending Tree, he also provides some basic tips on what consumers need to do to get out of debt they may have collected over the holidays. 

Click here to listen to this interview. 

Interview transcripts

If you’d rather read it, here’s our conversation with Matt, edited for brevity and clarity:

NHWM: Can you give me a brief synopsis on the recent holiday spending survey that Magnify Money just released and some of the key takeaways and trends that you saw? 

Matt Schulz: The most interesting thing to me is that you actually had fewer Americans going into debt for the holidays this year, but those who did went further into debt than in previous years. That just seems like 2020 in microcosm, because you have this incredibly large divide between the folks who are doing really well and are maybe taking out debts to do things like home renovations and things like that because they can afford it, versus the people who are really, really being hit hard and are taking out more debt than before, simply because they don’t have the choice and they’re trying to make ends meet and trying to do what they can until that next job comes around. 

NHWM: One of the more interesting aspects in the survey was that an increasing number of people taking out personal loans as opposed to credit cards. Why is that? 

Matt Schulz: With the bad economy and with a lot of people worried about their finances, there are an awful lot of people who just don’t want anything to do with credit cards at the moment. A big reason for that is just the risk that comes along with that card and the lure of having that available credit. There’s something very appealing when you’re struggling with money about a loan that is simple and straightforward and finite. I think that’s a big part of the appeal of personal loans; they’re a little more predictable, and also, once you’re done paying off that balance, you’re done and you don’t have to worry about running up anymore. 

NHWM: Why is a survey like this important for consumers?

Matt Schulz: One thing people should take away from this is that an awful lot of people are really struggling during this time. Another takeaway could simply be that credit cards aren’t the only game in town when it comes to managing your debts. You have credit cards, you have personal loans, you have point of sale loans, and other, such things. And if you shop around and you take the time to look for other things that are out there you may find some other options that are more appealing.

NHWM: As we look ahead into 2021, what do you think the major roadblocks consumers will face as they try to climb out of debt from the debt they collected during the pandemic in 2020? 

Matt Schulz: Nothing’s going to change substantially until the vaccine is really widely implemented. Because there’s only so much that can change when we still have so many people dying and getting sick because of COVID. But you also have the issues of banks still being a little more reluctant to lend because of the difficult economy. You have lingering joblessness and you still have people who are really still trying to find their way in this kind of new normal that we’re in. And if we hadn’t gotten it, if there’s no stimulus, then within the next couple of months, we would have seen a lot of people starting to miss credit card payments and other types of payments and things could have gotten really ugly in the short term, even as the prognosis with the vaccines and with the health aspects of the pandemic improving. So there’s still an awful lot of roadblocks out there and still an awful lot to be done. But there is also a reason for, for optimism and hope.

NHWM: How far into the future do you foresee the financial ramifications lasting from the pandemic? Six months? One year? Two years?  .

Matt Schulz: The truth is that things could get significantly worse financially, even as things get significantly better with the pandemic. Even when the pandemic is in the rear view mirror, it’s still going to take a long time to recover all of the jobs that were lost, and for small businesses to recover, and for many, many different industries to get their feet back under them. So as optimistic and hopeful as we may be with the health side of things, with the pandemic in the medium to long term, there’s definitely going to be some rough times ahead financially before we’re all in the clear.

NHWM: Switching gears a bit, let’s talk about some basics when it comes to credit cards and personal loans. Can you explain the difference between APR and interest rates? 

Matt Schulz: With a credit card, generally speaking, the APR and the interest rate are more or less the same thing, because there are fewer fees involved on an ongoing basis with the credit card. So basically the interest rate is the cost of borrowing what you borrow. Whereas the APR is a little bit of a broader measure of the costs, which includes the interest rate, and any other fees that may be involved. So especially if you’re talking about a mortgage, for example, there can be significant difference between the interest rate and the APR, because there’s so many pieces involved there.I know a lot of, a lot of people use APR and interest rates, um, interchangeably, and sometimes that’s okay, but, but not always,

NHWM: Can you talk about why it’s better to pay more than the minimum payment when it comes to credit cards and personal loans? 

Matt Schulz: Making just the minimum payment on a credit card is the fast track to debt. It’s really, as simple as that. Really the best thing about credit cards is that you can make that high interest rate irrelevant by paying your balance in full when the bill comes. That’s an advantage that credit cards have over personal loans and other types of loans. But the truth is that job, number one or anyone with a credit card is to pay that balance off as quickly as you can. The next time the bill comes in you should not carry a balance. But life is really expensive and that’s not always possible. But it’s really important to make more than the minimum payment, because the more of that balance that you can pay off, the more you’ll save yourself in interest in the long run and interest is what really is a killer when it comes to credit card debt,

NHWM: When it comes to personal loans, what are some best practices that people can do to ensure that they don’t get into financial trouble, especially if they’re taking out a personal loan, because basically they feel like that’s the only choice they have.

Matt Schulz: With a personal loan, it’s really about two things: i\It’s really about shopping around to make sure that you have the best rate that you can get, and also just understanding any fees and other details that might go along with it. Because the truth is that lenders and others who give out various types of loans have made it so easy to apply for these things, sometimes people will apply without doing their due diligence, and people make bad decisions in life when they don’t understand what they’re getting into, and that’s absolutely true when it comes to money as well. So it’s just really important that you understand with that personal loan what the interest rate is, what any fees are that are associated with that loan, what your monthly payment is, how long you have to pay that loan. All of those sorts of details are really important to understand.

NHWM: That’s the best financial advice you can give to consumers for 2021?

Matt Schulz: The best piece of financial advice I think, period, is to live beneath your means. That’s certainly not always possible. It’s a really good goal to have, and it’s a really important thing to strive for and to keep in mind, but it can be really, really challenging in terms of 2021. What I would say is that people need to understand that there’s really no such thing as having too much money in an emergency fund. And that if you don’t have three months or six months worth of expenses saved up in an emergency fund, that should be at the top of your priority list financially for 2021. People often wonder if they should focus on paying down their debt more or building their emergency fund, and the correct answer is that they should do both at the same time, because if you pay off your credit card, but have no emergency fund, the next little crisis that pops up is going to force you to put that purchase on your credit card. And then you just go back into debt and you enter this never-ending cycle of debt that so many people find themselves in. It’s a long answer to your question, but really the best piece of advice for 2021 is really to make sure that you have that emergency fund built and that you keep adding to it going forward.

While Matt  provides some valuable insight as to why many consumers went into debt during the holiday shopping season last year, he also provides ways you start the new year off right. 

For the entire interview, which includes Matt’s advice for handling your debt in 2021 and the difference between APR and interest rates in personal loans, listen to the above audio segment.