Credit card usage, surpassing credit limits and delinquencies have all increased over the past five months, according to a new survey of consumer spending.
The findings of the ‘ScoreSense Report: Survey of Holiday Spending Behavior and Credit Outlook Analysis’ were the outcome of a two-year analysis of consumer spending and credit.
A comparison of this year’s post-holiday spending compared to the holiday seasons of 2019 and 2020 revealed that nearly half of consumers used cash for holiday spending and one in five overspent their 2021 holiday budgets “slightly or went well above”.
Additionally, nearly 25% of respondents said their 2021 holiday spending added to their current debt.
Carlos Medina, senior vice president at One Technologies, which provides credit score monitoring product ScoreSense, said the figures are “troubling when you consider that many consumers will not receive their usual tax refunds to pay off holiday debt because they can't take the full write-offs for child tax credit or for college loan interest”.
The study also revealed a decrease in inquiries and new trade accounts since September, which it said is in line with other reports from the credit and lending industry and attributed this to consumers making fewer large purchases.
"We believe that these factors, along with inflation, will lead to more credit spending for basic living and that consumers will delay major purchases as long as possible. This is sadly a perfect storm for debt and credit problems, and the data is revealing it is happening now," added Medina.
The survey also found that late payments of 180 days or more, including collections, repossession and foreclosures, trended down over the past five years, marking an improvement in consumers paying down debt.
ScoreSense cautioned that as delinquencies rise, derogatory alerts may begin to increase.
Credit ratings agency Moody’s warned US banks, back in 2020, that the US banking sector will experience a rapid increase in loan delinquencies and charge-offs in 2021.