Holiday Credit Card Use Expected to Rise Amid Economic Pressure

This holiday shopping season, consumers say they plan to rely on credit cards to purchase their gifts. Credit card use is set to increase, according to a report released by TransUnion. More consumers, 42%, plan to rely on credit cards, compared to 38% last year.

This is important to subprime lenders. Consumers increase their credit card activity during holiday shopping. Accordingly, their balances increase, too. And these balances increase late payments in the new year. Of course, those on low budgets feel it most.

“Higher-risk consumers are relying more on their credit cards this year because they need to bridge the gap,” said Charlie Wise, senior vice president and head of global research and consulting at TransUnion.

People feel unsure about the economy. Prices are still high. The shutdown made many worry even more. On top of this, 86% of people are worried about possible trade tariffs. These could make everyday items cost more. They put extra strain on people with tight budgets.

Nervous shoppers often use credit cards for budget shortfalls, which may increase risk for lenders.

Consumers are feeling stretched financially this holiday season, as prices rise and economic uncertainty lingers.

Many consumers plan to open new credit cards next year. TransUnion found that 30% of people plan to apply for new credit and/or get new loans. Fifty-five percent of that group wants a new credit card. This can trigger more requests to lenders — especially those who may already feel stretched.

“There’s demand for credit across the risk spectrum, but subprime borrowers will take a new card if it’s offered,” Wise said.

This shopping season shows convincing signs that people plan to use credit cards a lot. More than 249 million American households now have at least one credit card. The number of open cards keeps increasing, and many families will juggle more accounts than before.

Heavy holiday spending can cause problems for subprime lenders. Borrowers may use credit cards to pay for basic needs. Some fall behind when the bills come due. That can increase missed payments as well as early-year losses.

High spending also increases card use — a warning sign for subprime lenders.

People feel less sure about their money. But they still plan to shop.

About 55% of people feel hopeful about their money in the next year. That is lower than last year. Inflation is still the number-one worry for most families. Others fear a recession and rising housing costs.

Younger shoppers feel more hopeful. Older shoppers feel more strained. But even the hopeful groups say they feel squeezed by rising prices.

Falling trust in consumer finances is important to subprime lenders. Many strapped shoppers use credit cards to supplement their budgets. Defensive borrowing can cause missed payments. It can also push near-prime people closer to subprime status.

More people frequently check their credit reports. More than half of Americans check at least once per month. Almost all say it is important to check for fraud, mistakes, and score changes.

In addition, more credit checking will likely increase the number of consumers who shop around for APRs. This puts lenders under more pressure. 

“Credit monitoring is a real consumer tool. It’s helped many build better habits,” Wise said. 

Also, consumers may sink their credit scores when they apply for too many new accounts.

TransUnion’s Credit Essentials tool provides alerts, scores, and offers. This means more borrowers will come to lenders knowing more about their credit. Some will look for better terms. Some may feel confident even when their credit is weak. 

Subprime lenders should expect more requests for new loans and credit cards this holiday season.