Americans are increasing their borrowing to fund a record holiday shopping season, pushing U.S. credit card balances to $1.29 trillion in the third quarter.
U.S. Credit Card Balances Reach $1.29 Trillion
- U.S. credit card balances grew by $22 billion in the third quarter to reach $1.29 trillion, according to Federal Reserve data.
- KPMG consumer surveys show estimated holiday spending will rise 5% year-over-year, with shoppers planning an average expenditure of $783.
- Surveys reveal that 46% of Gen Z respondents have postponed or skipped rent or mortgage payments to finance holiday purchases.
Consumer Debt Increases Ahead of Holiday Spending
Americans are turning to borrowing and adding to consumer debt to drive record holiday spending. On Tuesday, the New York Fed released its latest Household Debt and Credit Report, showing that U.S. credit card balances increased $22 billion to a record $1.29 trillion in the third quarter.
Aggregate delinquency rates worsened during the period. However, transition rates into serious delinquency for credit cards slightly improved following a sharp increase between 2022 and 2024.
The approaching shopping season is set to add to this debt burden. According to KPMG’s latest Consumer Pulse survey of 2,005 consumers conducted from September 10 to 25, estimated holiday spending will rise 5% year-over-year. Americans expect to spend an average of $783 this season.
“Price pressures haven’t gone away,” KPMG said, with consumers turning to debit cards and deferred payment options to fund holiday expenses.
Debit cards are now the preferred payment method for the holidays at 73%, overtaking credit cards at 69% and cash at 68%. Meanwhile, nearly a quarter of respondents expect to use buy-now-pay-later options for more than 21% of their purchases.
Retail Sales Are Projected to Exceed $1 Trillion
In mid-October, the National Retail Federation forecast that retail sales in November and December would grow 4.2% to $1.01 trillion, up from $972 billion. This marks the first time retail sales will cross the 13-digit threshold during the holidays.
“We head into the holiday season with strong spending momentum, as consumers remain the bright spot in the economy,” said Mark Mathews, NRF chief economist.
VISA released similar predictions last week, stating it expected holiday retail sales to rise 4.5%—the largest increase since 2021—and average spending to increase 5.6% to $777. This projection followed an October consumer survey demonstrating continued willingness to spend despite elevated inflation.
Spending increases are not uniform across income brackets. Around a third of households earning under $100,000 annually plan to switch to lower-cost items or discount shops for their holiday purchases.
| Organization | Metric | Projected Growth / Total |
|---|---|---|
| New York Fed | Q3 Credit Card Balances | $1.29 trillion (up $22 billion) |
| KPMG | Average Holiday Spending | $783 (up 5% YoY) |
| National Retail Federation | Nov-Dec Retail Sales | $1.01 trillion (up 4.2%) |
| VISA | Holiday Retail Sales | Up 4.5% |
Gen Z Respondents Skip Rent or Mortgage Payments
A survey of 2,000 American adults conducted between October 16 and 20 by Accredited Debt Relief revealed that 46% of Gen Z respondents postponed or skipped rent or mortgage payments to pay for holiday spending. This compares to 28% for millennials and 14% for Gen X.
“These findings suggest that the pressure to create a memorable holiday can outweigh practical financial priorities,” said Bobbi Rebell, chief financial education adviser at Accredited Debt Relief, who told Newsweek that many consumers feel embarrassed about scaling back spending.
“When people delay essential payments to afford holiday celebrations, it’s a concerning sign that spending expectations are exceeding what their budgets can support,” she added. “They’re sacrificing financial stability for expenses that should fit around their obligations.”
Prices rose faster than expected in October according to the Bureau of Labor Statistics, keeping inflation above the Federal Reserve’s long-term 2% target.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
