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By Hugh Cameron
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In driving record holiday spending, Americans are turning to borrowing and adding to the country’s already sizable pile of consumer debt.
Tuesday saw the release of the New York Fed’s latest Household Debt and Credit Report, which showed that U.S. credit card balances increased $22 billion to a record $1.29 trillion in the third quarter. Aggregate delinquency rates worsened but transition rates into serious delinquency for credit cards “slightly improved,” after what researchers said was a sharp increase between 2022 and 2024.
But the approaching shopping season seems set to add to the country’s increasingly troubling debt burden.
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According to KPMG’s latest Consumer Pulse survey, based on responses gathered from 2,005 consumers from September 10 to 25, estimated holiday spending will rise 5 percent year over year, with Americans expecting to spend an average of $783 this season. But KPMG notes that “price pressures haven’t gone away,” with consumers turning to debit cards and deferred payment options to fund their holiday expenses.
Going into Debt for Christmas
According to KPMG, debit cards are now consumers' preferred payment method for the holidays at 73 percent, overtaking credit cards at 69 percent and cash at 68 percent. Meanwhile, a larger share of respondents are expecting to use buy-now-pay-later options to finance a significant portion of their shopping this year, with close to a quarter expecting to use it for more than 21 percent of their purchases.
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Borrowing looks set to fuel a historic holiday shopping season.
In mid-October, the National Retail Federation (NRF) forecast that retail sales in November and December would grow 4.2 percent to $1.01 trillion—up from $972 billion and crossing the 13-digit threshold for the first time.
This is despite consumers remaining “mindful of their budgets” and grappling with elevated gas prices and other pressures on household spending.
“We head into the holiday season with strong spending momentum, as consumers remain the bright spot in the economy,” said NRF Chief Economist Mark Mathews.
Similar predictions have come from VISA, which last week said it expected holiday retail sales to rise 4.5 percent—the largest since 2021—and average spending to increase 5.6 percent to $777. This was based on its October consumer survey, which it said demonstrated “continued willingness to spend even as shoppers remain value-conscious amid elevated inflation.”
VISA also found that spending increases were not uniform among income groups, with around a third of households on under $100,000 annually planning on switching to lower-cost items or shops for their holiday spending in 2026.
And a survey of 2,000 American adults taken October 16 to 20 from the U.S debt settlement firm Accredited Debt Relief revealed that 46 percent of Gen Z respondents have postponed or skipped their rent or mortgage payments to pay for their holiday spending, compared to 28 percent of millennials and 14 percent of Gen X.
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“These findings suggest that the pressure to create a memorable holiday can outweigh practical financial priorities,” said Bobbi Rebell, chief financial education adviser at Accredited Debt Relief, who told Newsweek that many consumers may feel embarrassed about scaling back spending on those around them, or underestimate the combined costs of holiday season.
“When people delay essential payments to afford holiday celebrations, it’s a concerning sign that spending expectations are exceeding what their budgets can support,” she added. “They’re sacrificing financial stability for expenses that should fit around their obligations.”
Meanwhile, nearly half (45 percent) either have or expect to shoulder holiday season-related debt in 2026, rising to two-thirds (67 percent) for Gen Z.
Inflation Adds to Holiday Season Strain
The simultaneous rise in holiday spending and the reliance on borrowing comes amid elevated inflation and a widely felt cost-of-living crisis in the U.S. Prices rose faster than expected in October, according to the latest report from the Bureau of Labor Statistics (BLS), and inflation remains stubbornly above the Federal Reserve’s long-term two-percent target.
Much of this increase has been fueled by rising energy costs—a product of the Iran war among other pressures—and some have warned that high diesel prices could drive up freight and overall retail costs for consumers this holiday season.
"Diesel is driving costs up well beyond the headline inflation rate. Overall inflation is running above 3 percent, but our outbound shipping costs are up roughly 8 times that rate year-over-year,” Conn Davis, CEO of the self-defense product manufacturer Byrna Technologies, told Newsweek. “That’s after we changed carriers and invested in technology to bring them down. Fuel-linked inputs like plastic components are up even more."
"Businesses can only absorb so much,” he added*.* “If fuel stays where it is, consumers will start to see more of it in shipping fees and pricing, especially on smaller orders where the shipping cost is a larger share of the total cost."
Diesel cost $6.13 per gallon as of Wednesday, according to AAA, and many logistics providers including the U.S. Postal Service and Amazon have introduced fuel-related surcharges since the launch of the Iran war.
Contact Newsweek editors on this story: Daniel Orton and Cristina Diciu.
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