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Holiday shopping fuels the return of credit card debt

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This year, holiday shopping was back with a bang. However, you cannot return the gift of debt.

After Americans paid off a record $83 billion in credit card debt in 2020, helped by government stimulus checks and fewer opportunities for discretionary purchases, credit card balances are heading higher once again. 

Credit card balances increased by overall 2% $17 billion in the third quarter of 2021, according to the most recent data from the Federal Reserve Bank of New York. 

Fourth quarter: Powered by return of holiday plansConsumers paid more than $1 trillion.

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Americans could be in the position to attain the title of “American” by the end the year. $70 billion more in credit card debtAccording to a projected by WalletHub personal finance website

According to WalletHub data, the average balance on a household’s cards is $8,000.

Balances are expected to continue to rise in 2022TransUnion forecasts that the end of the first quarter could be 10% more than it was a year ago. That is due to increased credit applications and consumers spending more. As borrowers spend less on holiday purchases, the card balances usually fall in the first three months of the calendar year.

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

Charlie Wise from TransUnion, global research director and consultant said “The consumer landscape starts to look more like the pre-pandemic period.” With stimulus funds drying up and forbearance programs ending, credit demand is increasing.

But credit card debts are particularly problematic hard to pay downWith the average annual percentage rate exceeding 16%, this is a significant advantage.

Eric Ellman is the Senior Vice President of Public Policy and Legal Affairs for Consumer Data Industry Association. He advises consumers to think carefully about any debt obligations they may take on in this new year.

He said that consumers who get into trouble with their finances can have obvious consequences. Their credit score could drop, which could lead to higher borrowing costs in the future.

Ellman stated, “You should look at the future before you make any purchase.”

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