According to consumer payment tracking service First Data, in November credit card transactions increased by more than 7%. Early December saw another surge in spending via plastic. Data released by consumer reports revealed that shoppers planned on spending 6% more on holiday shopping this year than last – an average of $756 per shopper.
Increased consumer use of credit can, in theory, help spark drive overall economic growth by allowing people to outspend the rise in their personal incomes. Experts are also pointing to the upturn in consumer confidence in combination with the dip in the nation`s unemployment rate as being indicative of why many American s have become more willing to open up lines of credit on which to borrow.
Credit card-fueled spending growth is not all good, however. The heavy borrowing practiced by consumers when the economy was booming is, in part, what led to the financial crisis in 2008. While the country’s debt has lessened in the years following the recession, recently consumer credit card debt is on the climb once again, which may very well lead to many individuals finding themselves faced with a post-holiday personal finance struggle. According to a Consumer Reports Study, nearly 6% of consumers are still struggling to pay down credit card debt that they accumulated buying gifts last Christmas.
“There`s a misunderstanding that the minimum payment is sort of an adequate payment,” said Boston College marketing professor Linda Court Salisbury, according to The Washington Post. “If you pay the minimum payment every month, the cost to you is going to be enormous.”
New Federal regulations passed recently are designed to help consumers get a better grasp on the seriousness of their debt situation by mandating that credit card companies must disclose the length of time it would take an individual to pay off their balance in its entirety simply by making the minimum payment each month. Salisbury coauthored a recently-released study that found the new information provided by credit card companies does not seem to affect how much money consumers pay towards their bills.