American consumers are heavily in debt, but holiday spending this year is still expected to reach a new high.

As the holiday season approaches, many Americans have already accumulated record levels of credit card debt. However, consumer spending during this holiday season is still expected to reach new highs. According to a report released last week by the National Retail Federation (NRF), total consumer spending between November 1 and December 31 is projected to reach a record between $979.5 billion and $989 billion. NRF Chief Economist Jack Kleinhenz stated, "Job and wage growth, moderate inflation, and healthy balance sheets have contributed to robust holiday spending." Despite strong consumer performance, other reports show that an increasing number of shoppers are relying on credit cards to make holiday purchases. According to the latest survey by LendingTree, 36% of consumers have taken on debt during this holiday season, with an average debt of $1,181, higher than the $1,028 in 2023. The phenomenon of holiday debt is not surprising. Prices are still high, meaning many Americans have no choice but to borrow to consume, stated LendingTree Chief Credit Analyst Matt Schulz. He pointed out, Inflation remains a major issue in the American economy and has a significant impact on people's financial situations, including holiday spending. According to a report on household debt by the Federal Reserve Bank of New York, credit card balances in the US had increased by 8.1% compared to the same period last year before the peak of holiday spending. In addition, a holiday spending survey by NerdWallet found that 28% of credit card users have not yet paid off the debt from last year's gift purchases. Schulz also mentioned that some consumers' spending is a reflection of confidence. He stated, Some consumers choose to go into debt because they have no choice, while others do so to reward themselves, not caring about paying extra interest just to buy what they or their family truly want. However, credit cards are still one of the most expensive forms of borrowing. Currently, the average credit card interest rate in the US has exceeded 20%, nearing historical highs, and the annual interest rates on some retail cards are even higher. The LendingTree survey also revealed that among consumers with debt, 21% expect it will take them five months or even longer to pay off their holiday spending debt. Schulz warned that such repayment periods will result in high interest costs, placing a heavy burden on consumers' finances. This means less funds will be available for other important goals in the new year, such as building an emergency fund or saving for college tuition, he added. In more extreme cases, it may make it difficult for consumers to pay essential bills or cover basic living expenses.