Holiday Spending Pushes U.S. Credit Card Debt to Record High

As the 2024 holiday season unfolds, U.S. consumers are projected to elevate credit card debt to unprecedented levels, driven by robust spending during major shopping events like Black Friday and Cyber Monday. This surge in expenditure is occurring against a backdrop of persistent inflation and escalating living costs, intensifying financial pressures on many households.

Recent data indicates that total credit card balances have risen by 5.8% compared to the previous year, reaching $1.14 trillion.

This increase is particularly pronounced among millennials, who are increasingly relying on credit cards to manage holiday expenses. A study by Piere, a personal finance app, reveals that credit card usage among millennials for purchases like Black Friday has jumped to 88% in 2024, up from 79% in 2023 and 72% in 2020.

The National Retail Federation (NRF) reports that approximately 197 million people shopped online and in stores from Thanksgiving to Cyber Monday, surpassing their projections. On average, shoppers spent $235, marking an increase from last year. Despite rising credit-card balances and notable financial strain, consumers continue to prioritize holiday traditions and gift-giving.

Financial experts express concern that this elevated spending, coupled with the accumulation of credit card debt, could lead to substantial interest charges if consumers fail to clear their balances within interest-free periods. In October 2024, Americans paid over $8.8 million daily in interest on a collective credit card debt of $17.45 billion. This debt and associated interest are anticipated to further increase after major shopping periods like Christmas, Black Friday, and Boxing Day sales.

The rise in credit card debt is not confined to the United States. In Australia, for instance, households are projected to incur extraordinary credit card debt amounting to $86 billion over the holiday season, spanning November, December, and January. A significant portion of this spending occurred in November due to Black Friday sales, with consumers charging $29.9 billion.

Economists note that while job and wage gains, modest inflation, and healthy balance sheets have led to solid holiday spending, the reliance on credit cards to finance this expenditure may pose risks to financial stability. They advise consumers to manage their credit card debt proactively to avoid long-term financial burdens and be aware of the interest-free periods that can vary depending on when purchases are made within the billing cycle.

In conclusion, the 2024 holiday season is characterized by record consumer spending, significantly financed through credit card debt. While this trend reflects consumer confidence and a desire to maintain holiday traditions, it also raises concerns about financial sustainability and the potential for increased debt burdens in the coming year. Financial advisors recommend prudent spending and effective debt management strategies to mitigate the risks associated with rising credit card balances