Credit card debt is growing at an alarming rate in the U.S., with consumers on track to set a spending record this month and more than one-third of Americans facing debt from the holiday season.
The National Retail Federation reported last week that spending between November 1 and December 31 is "clearly on track" to reach a record, between $979.5 billion and $989 billion.
Meanwhile, credit card balances grew by $24 billion during the third quarter of 2024 to reach a record $1.17 trillion, according to the Federal Reserve Bank of New York.
Credit card balances are not only 8.1% higher than they were a year ago, but 28% of cardholders have yet to pay off the gifts they purchased last holiday season, according to a report by NerdWallet.
Despite record-breaking debt, Americans spent heavily during the holidays.
A survey from LendingTree shows over a third of American consumers (36%) took on holiday debt this season. Those who went into debt took on an average of $1,181 -- up from $1,028 in 2023.
Parents of young children (48%) were most likely to take on debt, followed by millennials (42%) and those earning $30,000 to $49,999 (39%).
"Inflation is still a big deal in this country, and it's having a huge impact on people's finances," Matt Schulz, LendingTree chief credit analyst, said in a statement. "If you were to only buy the same things you bought last Christmas, you'd likely have to spend more this year thanks to inflation. For many Americans, that means you either have to cut back on gifts or take on more debt. While people make lots of sacrifices to deal with higher prices, many may not want to sacrifice at the holidays, so debts continue to rise."
Paying down debt is expected to be a top resolution for many in 2025. LendingTree's survey shows 42% of those who took on debt regret spending as much as they did, and 21% expect it'll take five months or longer to pay it off. Another 20% are only making minimum payments.
Experts caution that leaning on credit cards to purchase gifts can cause long-term financial strain if balances aren't paid off quickly, as high interest rates can quickly escalate the overall cost.
As of August 2024, the average credit card interest rate reached 23.37%, according to the Federal Reserve Bank of St. Louis. This means carrying a $1,000 balance on your credit card could cost you around $234 a year in interest alone.