Holiday Shoppers Ease Up on Credit Card Debt in Time for Shopping Season

A woman is in the jewelry store
In October 2014, U.S. consumers accrued credit card and other non-mortgage debt at a slower rate, which could result in a weaker holiday shopping season than initially anticipated. Nevertheless, according to the National Retail Federation, holiday shopping is still expected to be at its highest in nearly six years.

According to the Federal Reserve, consumer credit card balances, which reflects debt not linked to real estate loans, increased at a 4.9% seasonally adjusted annual rate, amounting to $3.279 trillion in October. This is the smallest monthly increase since November 2013, and much less than economists and financial analysts expected. In comparison, overall debt grew by 5.7% in September.

Revolving credit, such as credit card balances, grew at a rate of 1.3%, which is down from September’s 1.9% growth. Non-revolving credit, such as auto or student loans, experienced a 3.2% growth, down from prior month’s 7.1% figure.

As post-recession consumer confidence in the economy increases, lower borrowing coasts for vehicles has significantly increased vehicles sales over the past two years. However, it seems that American consumers are still quite restrained regarding credit card usage, a habit learned during the Great Recession. The trend of reducing credit card balances gave way last year to consumers relying on credit again, albeit in more measured way. It seems that consumers are no longer interested in keeping up with the Joneses, choosing careful budgeting over careless spending.

“Holiday shoppers should be using cash whenever possible — which is a tried, tested, and proven method to prevent overspending — as well as creating a budget and sticking to it,” explains John Diaz, Spokesperson for The Debt Management Group.

However, holiday credit card debt can be a burden for some families, especially those who belong to the middle class. While middle class families have higher credit limits than lower income families, that doesn’t necessarily mean there is more money to go around than with those who earn less.

According to a recent study conducted by market research company Harris Interactive Inc., middle class families earning annual salaries between $50,000 and $75,000 will take an average of 2.6 months to pay holiday debt in full. On the other hand, lower income families earning less than $50,000 are expected to take an average of only two months to pay off holiday debt.

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