A woman shops at a Target store in Chicago on November 26, 2024.
Kamil Krzaczynski | AFP | Getty Images
Heading into the holiday season, many Americans were already saddled with record credit card debt. Still, consumer spending is expected to reach new highs this season.
The National Retail Federation said last week that spending from Nov. 1 to Dec. 31 was “clearly Things are going well” reaching a record of $979.5 billion to $989 billion.
“Growing jobs and wages, moderate inflation, and a strong balance sheet are contributing to strong holiday spending,” NRF Chief Economist Jack Kleinhenz said in a statement.
However, other reports indicate that many shoppers are increasingly relying on credit cards to manage their holiday shopping.
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At that point, 36% of consumers will be in debt this season. report Found by LendingTree. The average income of those in the red was $1,181, up from $1,028 in 2023, according to the survey of more than 2,000 adults.
“It's no surprise to anyone that so many Americans took on debt this holiday season,” said Matt Schultz, chief credit analyst at LendingTree. It means they had no choice.”
“Inflation remains a serious problem in this country, and it is having a major impact on people's finances, including holiday spending,” he said.
Credit card debt hits all-time high
Heading into the peak holiday shopping season, credit card balances are already 8.1% higher than a year ago, according to the New York Fed. Report on household debt.
Additionally, another holiday spending report found that 28% of credit card users didn't pay off gifts they bought last year. Nerd walletIn September, we conducted a survey of more than 1,700 adults.
In some cases, Schultz said, Americans' willingness to spend is a sign of confidence. “There are certainly people who borrow money because they had no other choice, but they want to have a little luxury to get something they or a loved one really wants and don't mind paying a little extra interest. Some people borrowed money because they didn't have one.
But credit cards are still one of the most expensive ways to borrow money. The average interest rate on credit cards is currently over 20%, near an all-time high. Some retail cards have even higher APRs.
credit card problems
LendingTree also found that 21% of people with debt expect it to take more than five months to pay it off. Mr. Schultz said the current situation would result in exorbitant interest rates and a significant burden.
“That means you'll have less money to put toward other big goals in the new year, like building an emergency fund or saving for college,” he said. “In more extreme cases, people may not be able to pay for essentials or keep food on the table. In either case, this is a big problem.”
