By the end of the first quarter of 2025, total U.S. household debt had skyrocketed over $18.4 trillion. Of this, consumer debt accounted for a hefty $5.06 trillion. This shocking number puts a fine point on the economic crisis that so many Americans are facing right now. Their latest findings indicate that consumers are increasingly relying on credit to cover their bills. This growing trend is cause for alarm over their long-term fiscal sustainability.
In August, revolving debt—which includes most forms of credit card debt—shrank by 5.5 percent. This downturn marks a key inflection point in consumer behavior, even as Americans continue to deal with the impact of high-interest rates and negative impacts from depleted savings. Credit card interest rates are shooting up. The national average annual percentage rate (APR) is currently at 20.03 percent, with lenders charging up to 28 percent. The year’s lagging growth of revolving debt is an early sign of a positive shift in consumer behavior. Consumers are increasingly feeling the pressure that their current pace of borrowing is not sustainable.
Non-revolving credit increased by $6.3 billion. This jump represents a 2 percent increase, fueled by record-setting auto loans, student loans, and durable goods financing. That’s tiny compared to the $13.2 trillion in total consumer debt as of mid-2023. By the second quarter, seriously delinquent student loans had shot up to 10.2 percent. This enormous increase panics conservatives because it endangers the long-term fiscal fortunes of millions of borrowers.
At the same time, Americans have largely drained the savings they amassed during the pandemic. Now, they’re accumulating credit card debt and maxing out. LegalShield’s Foreclosure Index jumped to its highest rate in the second quarter. It spiked by 13.3 percent, following the legal inquiries with foreclosures and personal finance troubles. That figure is almost 29 percent above where it stood one year ago. It’s a wake-up call that millions of people are feeling the squeeze to stay afloat.
“As consumers take on more credit to keep up with inflation and everyday expenses, many are hitting a breaking point. The increase in legal inquiries tied to foreclosures and personal finance issues suggests that debt-fueled spending is no longer sustainable for a growing number of Americans.” – LegalShield spokesperson
Consumer debt growth comes to a standstill As for consumer debt, it barely grew at all, increasing by just $400 million –of only 0.1 percent. The economic uncertainty still seems taut. The richest 20 percent of Americans today account for almost two-thirds of all consumption. Of those, the top 3.3 percent have realized the largest recent increase in expenditures. By contrast, inflation-adjusted spending among the bottom 80 percent has effectively flatlined.
This new data illustrates a very concerning divide in fiscal health between low- and moderate-income households. For those at the bottom of the ladder, the weight of this debt is ever more crushing. A June report found that delinquencies among people in the so-called prime demographic jumped 47 percent from a year earlier. This upshot illustrates the overwhelming financial pressure consumers are now facing.
Prior to the pandemic, revolving credit growth averaged under 5 percent per year. However, economic conditions have taken a sharp turn and inflation is taking a toll on everyday costs. As a result, consumers are rethinking their use of credit. Consumers are on high alert. This decline in revolving debt indicates they’re using their credit cards less than they used to.