As the holiday shopping season kicks into high gear, Americans are prepared to shell out big bucks.
This year’s holiday spending is expected to shatter records, according to a forecast by the National Retail Federation.
On average, shoppers will spend roughly $762 on their friends and family, a separate report by NerdWallet found.
And yet, 29% of shoppers who put holiday gifts on a credit card last year — or more than 35 million people — are still paying off those purchases, the report also said.
Heading into Black Friday and Cyber Monday, higher prices and product shortages are causing some shoppers to spend even more to get the items they want for the holidays.
That’s driving card balances back up after Americans paid off a record $83 billion in credit card debt in 2020, helped by government stimulus checks and fewer opportunities for discretionary purchases.
Overall, credit card balances rose by $17 billion in the third quarter of 2021, according to the most recent data from the Federal Reserve Bank of New York.
The average credit card balance is now $5,525.
However, under ordinary circumstances credit card debt is particularly hard to pay down, especially with the average annual percentage rate at more than 16%.
Eric Ellman, a senior vice president of public policy and legal affairs for the Consumer Data Industry Association, advises shoppers to be thoughtful about any new debt obligations that they take on this year.
“When consumers get in over their heads, there are some obvious implications,” he said. “Their credit scores could go down and that could increase the cost of future borrowing.”
“You should go into every purchase with an eye on the future,” Ellman said.