Holiday shoppers spend more on credit cards despite high interest rates

Americans are charging record amounts to their credit cards as the holiday shopping season heats up, risking hefty fees and dented credit scores.

Despite sky-high interest rates, Americans are charging record amounts to their credit cards as the holiday shopping season heats up, risking hefty fees and credit score fallout that personal finance experts say can be mitigated with a little planning.

Inflation, which was running at 7.7% in October, shows some signs of slowing but still hovers around historic highs. And while 37% of American households say their finances are worse now than last year, 74% plan on spending at least as much this holiday season — about $1,455 per consumer — according to a survey by consulting firm Deloitte. But respondents estimated that same budget would cover only about nine gifts this year, down from 16 last year.

Consumers are “going to find ways to combat the challenges they find,” says Rod Sides, global leader at Deloitte Insights. For example, households may cut back on holiday decorations at home to leave more budget for gifts.

Some retailers have said consumers are holiday-shopping earlier than usual in search of deals. As the season progresses, many Americans’ spending will pile onto credit card balances already at a record $866 billion in the third quarter, 19% higher than the same period last year, according to credit reporting agency TransUnion. In some cases, cash-strapped households are leaning on credit to pay for pricier necessities like winter utility bills.

Failing to pay down those card balances on time is costlier than it’s been in decades. To combat high inflation, the Federal Reserve has raised interest rates this year at the fastest clip in 40 years. Those hikes have pushed credit card interest rates to an average of 19.04%, according to Bankrate, surpassing the last record set in 1991 to hit the highest level recorded in data going back to 1985.

https://www.nbcnews.com/business/consumer/holiday-shopping-credit-cards-interest-rates-rcna56457


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