Credit Card Spending Accelerated In December As Americans Spent On Services And Retail

Consumers closed out 2024 strong as December credit card and debit card spending per household increased 2.2% over the same period a year ago.

Analysis by the Bank of America Institute showed December's spending growth was the second-fastest year-on-year growth in 2024.

The report released Friday said consumers should benefit in 2025 from "a supportive labor market with after-tax wage and salary growth up 3% YoY in December."

It also noted that retail saw a "bounce" last month as spending in the category, excluding restaurants and gas, jumped 1.3% for the same period - the biggest monthly rise in 2024 in that segment.

The strength in retail was "broad-based," with spending on clothing up 8.5% from November.

Consumers also spent 3.3% more on gas in December than the previous month.

"However, the rise does not appear to be due to higher gasoline prices, but more reflective of consumers continuing to travel through the end of the year," it said.

Americans had $1.7 trillion on their credit cards in the third quarter of 2024, according to the Federal Reserve Bank of New York's Center for Microeconomic Data.

"While growth in income has outpaced debt, elevated balance levels continue to reveal stress for many households," it said in November.

Capital One reported last month that credit card defaults are at the highest levels since 2010.

Despite the uptick in spending, Bank of America said its analysis found that consumers remain "less optimistic" than they were before the COVID-19 pandemic.

Still, consumer confidence improved over the year.

It also referred to a University of Michigan survey that showed there is an increase in consumers who believe "it is a good time to buy large household goods," like furniture, televisions, refrigerators or stoves.

"One reason could be that consumers think that recent cuts to the Federal Reserve's policy rate will make financing these purchases easier," Bank of America Institute said.

At the same time, consumers also believe it's a good time to purchase those items because prices are likely to get higher, noting that durable goods prices rose month-on-month in September, October and November, it said, citing data from the Bureau of Labor Statistics.

There's also concern among consumers that President-elect Donald Trump's proposal to increase tariffs on overseas goods might also increase prices.