Record-high credit card balances and delinquency rates did not stop consumers from accumulating even more debt this holiday season. Persistently high interest rates could exacerbate the problem further.
According to data compiled by Lending Tree, more than a third of American shoppers took on additional debt during the holiday season, with less than half of them saying they had planned for it. Those who went into debt borrowed an average of $1,181, up from $1,028 in 2023. Among those incurring debt, 65% charged their purchases to a credit card, 24% used a retailer’s card, and 21% opted for a buy now, pay later loan.
This happened despite entering the holiday season with credit card debt levels already at record highs. Credit card balances increased by $24 billion to reach $1.17 trillion at the end of Q3 2024, according to data from the New York Fed. Total household debt increased by $147 billion to reach $17.94 trillion. At the start of the holiday shopping season, credit card balances were already 8.1% higher than the previous year.
At the same time, delinquency rates also rose from the previous quarter. Credit card lenders wrote off $46 billion in delinquent loan balances in the first three quarters of 2024—a 50% increase from the prior year and the highest level since the Great Recession.
As of November, Capital One reported that its annualized credit card write-off rate reached 6.1%, up from 5.2% a year earlier. By the end of Q3 2024, 3.5% of all outstanding debt was in some stage of delinquency.
Battling with High Rates
These figures could climb even higher, as 42% of consumers surveyed by Lending Tree reported paying interest rates of 20% or more on their credit cards. While the average rate for general-purpose credit cards is about 21%, the average interest rate for retail credit cards has recently hit a record high of 30.45%. Despite these steep rates, Lending Tree revealed that two-thirds of respondents said they had no plans to consolidate their debt.
Interestingly, Lending Tree’s research also highlighted that consumers with the lowest incomes were the least likely to incur additional debt. Just 30% of respondents in this group reported taking on holiday debt—the lowest percentage among all income categories. On the other hand, six-figure earners took out the most debt, spending an average of $1,429 over the holidays.
