Credit Card Christmas: Taking on Shopping Debt Carries More Risk This Year

October 27, 2023 :Americans are expected to spend a record $955.3 billion on holiday shopping this year, according to Deloitte. And while many shoppers will use cash or debit cards to pay for their purchases, a significant number will turn to credit cards.

A recent survey by LendingTree found that 45% of Americans plan to use credit cards to pay for holiday shopping this year. The average credit card debt balance for U.S. households is currently at $7,118, and the Federal Reserve Bank of New York has warned that credit card delinquency rates are on the rise.

Taking on shopping debt on credit cards carries more risk this holiday season than in previous years due to a number of factors, including:

• Rising interest rates: The Federal Reserve has raised interest rates several times this year to combat inflation. This means that credit card interest rates are also rising, making it more expensive to carry a balance.
• High cost of living: The cost of living has increased significantly in recent months due to rising inflation and supply chain disruptions. This means that shoppers are more likely to max out their credit cards to cover holiday expenses.
• Economic uncertainty: The global economy is facing a number of challenges, including the war in Ukraine and rising energy prices. This uncertainty could lead to job losses and income reductions, making it more difficult for people to repay their credit card debt.

Shoppers who plan to use credit cards to pay for holiday shopping should carefully consider the risks involved. They should make sure to create a budget and stick to it. They should also avoid maxing out their credit cards and pay off their balances as quickly as possible to avoid paying high interest charges.

There are a number of ways to avoid taking on shopping debt on credit cards this holiday season. Shoppers can save money throughout the year by setting aside a portion of their monthly income for holiday shopping. They can also look for ways to cut back on other expenses, such as eating out less or canceling unused subscriptions.

Shoppers can also take advantage of holiday savings opportunities, such as early bird sales and Black Friday deals. They can also compare prices at stores and online retailers to find the best deals.

Taking on shopping debt on credit cards carries more risk this holiday season than in previous years. Shoppers should consider the risks before using credit cards for holiday purchases. There are a number of ways to avoid taking on shopping debt, such as saving money throughout the year and looking for holiday savings opportunities.