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A person walks past a Christmas lighting display in a window at Bulbs NYC lighting store near Union Square in New York City, Dec. 20, 2022. Alexi Rosenfeld | Getty Images Shoppers are springing for holiday gifts and decorations, but bustling mall traffic, full shopping bags and large hauls under the Christmas tree could hide a challenge for retailers: rising credit card balances and what that may mean when the bills come due. This holiday season, shoppers who ring up purchases on credit cards will pay more interest if they carry balances from month to month after the Federal Reserve’s string of rate hikes. The cost of borrowing has climbed as credit card delinquencies — the number of people not making payments toward their balance — have ticked up, though the metric remains below the highs of the Great Recession. In addition, student loan payments have resumed after more than three years of a pandemic-related pause, adding to the debt that many Americans are trying to pay off. Shoppers making their holiday purchases on credit will do so at a time when consumers are taking on more debt — and face bigger risks from carrying a balance. Retailers will not have a clear idea of how those factors will play out until January or February, said Aditya Bhave, senior U.S. economist for Bank of America. “In the first quarter, the big question will be how much will delinquencies rise,” he said. But Bhave said the American consumer has defied “doom and gloom” before and could do that once again. Consumers have kept shelling out, fueled by post-Covid revenge spending and a hunger for experiences, such as tickets to Taylor Swift concerts. They most recently surprised Wall Street with stronger-than-expected September retail sales. Already, investors and retailers have paid closer attention…

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Filed under: News - @ October 26, 2023 11:24 am