American consumers are continuing to rack up debt: Overall consumer credit increased at an annual rate of 2.1%, according to the latest tally from the Federal Reserve.

Revolving debt — that’s mostly on credit cards — was down 1.2%. Even after the Fed’s long-awaited rate cut, high interest rates on those credit cards have barely budged. That could be troubling as we head into the holiday shopping season.

To recap, American consumers made a big dent in our collective debt early in the pandemic. Then, around mid-2021, we started running the tab right back up, to a record $1.14 trillion in credit card debt by the second quarter of this year. 

“It’s just the rising costs of everything,” said Christie Matherne, who covers credit cards for WalletHub. She said even as inflation is slowing down, “we’re still kind of feeling those pinches of our wallets, basically.”

And consumers keep borrowing to make ends meet. 

Ted Rossman, an analyst with Bankrate, said people carrying heavy balances are charging everyday expenses. 

“It’s usually practical stuff. It’s not usually a vacation or a shopping spree,” he said. It’s more like groceries and gas. 

Holiday gifts tend to fall somewhere in the middle of that spectrum, Rossman said. And according to Bankrate’s early surveys, “many people are feeling frugal.”

A third of respondents said they’ll spend less on gifts this year than last. 

“Only about 1 in 4 said they’d be taking on debt this holiday season,” he said.

That’s a sign they can no longer stomach the high cost of carrying debt, according to Silvio Tavares, CEO of VantageScore. 

“They know higher rates are going to continue, and they’re a little bit concerned about the increasing cost of their monthly credit card bill,” he said.

Benchmark rate cuts will likely take a while to trickle down to credit cards. The credit industry is less responsive to Fed policy than, say, the mortgage industry, said Matherne of WalletHub.

“If people are going to use credit cards for holiday spending this year, they’re not likely to see any meaningful relief on their credit card interest rates,” she said.

She added that we will likely see more shoppers take out typically interest-free buy now, pay later loans offered at the point of sale, “if you’re gonna carry this debt over a month, like past the grace period of your credit card.”

For those consumers, Matherne said buy now, pay later offers might be appealing.