Credit card

Holiday shopping fuels the return of credit card debt


Holiday shopping is back in force this year. But going into debt is a gift you cannot return.

After Americans paid off a record $ 83 billion in credit card debt in 2020, aided by government stimulus checks and fewer discretionary shopping opportunities, credit card balances are on the rise again. on the rise.

Overall, credit card balances increased by $ 17 billion in the third quarter of 2021, according to the most recent data from the Federal Reserve Bank of New York.

In the fourth quarter, fueled by the return of vacation plans, consumers billed billions more.

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By the end of the year, Americans are now on track to $ 70 billion more in credit card debt, according to a projection by personal finance site WalletHub.

The average household card balance is now $ 8,006, WalletHub found.

Balances should continue to increase in 2022, closing the first quarter up 10% higher than a year ago, as more consumers apply for credit and increase spending, according to a forecast from TransUnion. Usually, card balances decline in the first few months of the year, as borrowers pay off vacation expenses.

By the fourth quarter of 2022, total balances are expected to reach $ 805.7 billion, according to TransUnion – the highest level since the start of the Covid-19 pandemic.

“The consumer landscape is starting to look more like the pre-pandemic era,” said Charlie Wise, head of global research and advisory at TransUnion. “With the expiration of the forbearance programs and the drying up of stimulus funds, the demand for credit is increasing.”

However, credit card debt is particularly difficult to repay, especially with an average annual percentage rate above 16%.

Eric Ellman, senior vice president of public policy and legal affairs for the Consumer Data Industry Association, advises buyers to think about any new debt they incur this year.

“When consumers gain the upper hand, there are 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 to the future,” Ellman said.

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