Americans spent an unexpected $52 billion over Black Friday weekend, and now it’s becoming clear how we managed to afford this shopping spree: we charged it. New Federal Reserve data shows that consumer borrowing surged by $20.4 billion in November — the highest month-over-month increase in a decade. Retailers’ happy holidays are coming at the expense of consumers, and one expert warns that when the bill comes due, it’s not going to be pretty.
The total volume of outstanding debt the nation carries is now up to nearly $2.5 trillion, not including mortgages. Our credit card debt, which rose $5.6 billion in November, is up to $798 billion. This is the highest it’s been all year (although it’s still slightly lower than the approximately $800 billion in credit card debt we carried at the end of last year).
These figures, high as they are, don’t even include the rest of what the retail industry described as a positive holiday shopping season, which means we can probably expect more of the same when December’s data is released next month.
Curtis Arnold, founder of the site CardRatings.com, says a lot of this increase can be attributed to the growth of aggressive offers from credit card issuers that promise 0% APR for balance transfers or purchases. “I think there’s a direct correlation,” he says. “The number of offers out there is proliferating” and the length of the promotional periods are growing, which Arnold says tempts consumers into adding to their overall debt load.
“You can ride those offers for only so long,” he warns. Come summer or fall, when the teaser rate expires, consumers could get a rude awakening. Some will be able to roll these new debts into yet another 0% offer, but that’s dicey, Arnold warns. Really piling on the debt makes it less likely that a lender will extend additional credit. If the economy takes a turn for the worse and more people become delinquent on payments, issuers could curtail those 0% offers.
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“The telling thing about this is borrowing is really up, but at the same time our savings rate is down and our income growth is not even keeping up with inflation,” Arnold says. For consumers who took advantage of credit card 0% APR offers, it’s a warning: Pay off those charges before the teaser rate expires or risk being trapped with high-interest debt.