Have you paid for last Christmas yet?

The world changes quickly, but attitudes can change at a snail’s pace.
And so, it may be instructive to consider the words of a Federal Reserve Board study, requested by President Eisenhower in 1957, that noted with a tone of alarm, “It has become respectable to be a debtor, and the desire to own a home ‘free and clear’ is no longer as strong as it was in the past.”
When was the last time you heard someone worry about becoming a debtor? Snails can come a long way in 67 years.
The concern at the time was a growth in “installment credit” to buy things such as cars and consumer goods. Never mind groceries. The first credit card machines there would come in the late ‘60s, prompting a lot of worries, as expressed by one woman in the Dayton Journal Herald in 1969, who said, “People won’t be lining up at grocery store cash registers, but rather at the bankruptcy courts.” (I used newspapers.com to research news stories from the past.)
My purpose here isn’t to scold or shame. From the perspective of nearly seven decades of hindsight, many of us would argue that easy terms have allowed Americans to raise their living standards while fueling economic growth. The warnings our parents and grandparents once issued can sound like a lot of hyperventilating today as we carry wallets filled with plastic and very little cash.
But then, a new report from the Federal Reserve Bank of New York says Americans now owe a record $1.17 trillion in unsecured credit card debt. Total household debt, including mortgages, jumped by $83 billion during the third quarter of the year to a record total of $17.9 trillion.
Wallethub.com reports that Utah saw the fourth highest increase in debt among states during that quarter, jumping by $1,004 for the average household to a total average of $236,197.
Despite all of this, most of the recent economic reports are brimming with good news. Delinquency rates are low (Utah ranked 45th in an earlier Wallethub delinquency report). Credit card debt is growing at only 4.8% per year, which is considered low. Unemployment is low and wages are rising. Bankruptcies and foreclosure rates are low, as well.
All these “suggest that rising debt burdens remain manageable,” New York Fed researchers told the media last week, according to CNBC.
And yet, I can’t help wondering what someone from 1957 might say if he or she were transported here. Would there be any truth to their hyperventilating? If times are good, should we be using the opportunity to get out of debt instead of spending more? Are economic conditions such that we have little choice but to borrow, and is that a concern for the long term? Should we be worried more about saving for retirement than about buying things today with plastic?
Those are hard questions this time of year. The Conference Board happily notes that American consumers are ready to spend $1,063 per household, on average, for holiday-related items in the coming weeks, which is up 7.9% from 2023.
Of course, a report last week from CNBC said 28% of credit card users are still paying off last year’s Christmas debt. And, to put that into what might be considered a grim perspective for a festive season, a New York Post story a few years ago cited research showing 53% of the gifts people give are completely forgotten not long after the holidays.
We’re borrowing to buy things that don’t really matter much.
Writing for Barrons, Sabrina Escobar reported some cracks in the good news.
“Researchers say they have noticed a rise in the pace at which people are transitioning into serious delinquencies, defined as more than 90 days overdue,” she wrote. Fed officials said this offers “a more dynamic and current view into consumer health than merely looking at overall delinquencies,” which currently exclude student loans.
As a CNBC report noted, low-income people, those hurt most by inflation, are paying rates of 20% or more on credit card balances, which is a burden.
As I said, I’m not trying to scold. These days, no one considers it anything less than respectable to be a debtor. Consumer spending, even with credit cards, is a barometer of good times. Attitudes have changed, and not without reason.
But good times won’t last forever. It may be wise to consider that.