Consumer Borrowing Picked Up In June But Worrisome Trend Persists

It appears Americans used some of their tax refunds to pay down credit card debt in May, only to charge the plastic back up in June.

While some analysts consider the increase in borrowing a good sign that the American consumer is "resilient" and still willing to borrow and spend, a worrying trend underlies the data. 

Revolving debt, primarily reflecting outstanding credit card balances, contracted by -4.7 percent in May. In June, it rebounded, growing by $6.8 billion, a 6 percent month-on-month increase, according to the latest Federal Reserve data.  

Overall, consumer debt grew by $14.2 billion in June to $5.17 trillion.

The Federal Reserve consumer debt figures include credit card debt, student loans, and auto loans, but do not factor in mortgage debt. When you include mortgages, U.S. households are buried under a record level of debt. As of the end of Q1 2025, total household debt stood at $18.2 trillion.

The decrease in revolving debt in May corresponded with tax refund season. This likely explains the sharp single-month drop in credit card balances. Many people use tax refunds to pay down debt.

However, the May drop in revolving debt also reflected a broader trend. Over the last year or so, the growth in consumer borrowing has slowed notably. This may indicate that consumers are running up against their credit card limits. That’s bad news for an economy that depends on consumer borrowing and spending to keep plugging along.

Meanwhile, the growth in non-revolving debt reflects this same kind of consumer stress.

Non-revolving credit balances rose by a modest $7.4 billion in June, a 2.3 percent increase. This reflects borrowing for automobiles, student loans, and other big-ticket items.

Non-revolving debt currently stands at $3.81 trillion.

Non-revolving credit growth has been tepid for well over a year. It averaged around 5 percent before the pandemic but has averaged around 2 percent in recent months. The growth in non-revolving credit reveals consumers have cut back on big-ticket spending to cover the increasing costs of day-to-day necessities.

Given that consumer spending accounts for about two-thirds of U.S. economic activity, any decline in consumer spending power is a worrisome trend.

Even though borrowing rebounded in June, this doesn't necessarily mean consumers are suddenly "more confident" as some analysts assert. It could just as well reflect that stressed consumers are relying on credit cards to make ends meet in this era of unaffordability. They were able to get a little relief from tax refunds, but that only bought them a little time.

Consumer Debt Since the Pandemic

Flush with stimulus and locked in their homes, Americans paid down their credit cards during the pandemic. Revolving debt dropped below $1 trillion in 2020.

At the same time, they beefed up their savings. In April 2020, the personal saving rate skyrocketed to 31.8 percent. It was by far the highest level since the 1960s.

Now the savings are gone.

Aggregate savings peaked at $2.1 trillion in August 2021. By June 2023, the San Francisco Fed estimated that aggregate savings had dropped to $190 billion.

In other words, Americans blew through $1.9 trillion in savings in just two years.

By March 2024, the San Francisco Fed estimated that the entirety of those excess savings were gone.

Having blown through their savings, Americans turned to Visa (V) and Mastercard (MA) to make ends meet as post-pandemic price inflation spiked. That brings us to today, with Americans buried under more than $5 trillion in consumer debt.

Growing consumer stress adds weight to the argument that consumers aren't borrowing because they're confident or resilient. They appear to be more desperate. 

According to the latest New York Fed data, 13.1 percent of credit card balances are at least 90 days overdue. That’s the highest level since the late stages of the Great Recession.

Serious credit card delinquencies have climbed by 5.5 percent since the third quarter of 2022. That’s a faster deterioration pace than what we saw during the 2007-2010 period.

According to NY Fed data, credit card balances ticked down in Q1 2026. This indicates that consumers have slowed their pace of debt accumulation (It’s hard to charge it when you’ve hit your credit limit) even as they are struggling to service their existing debt.

Lower-income Americans are feeling the biggest pinch. However, affluent areas are also charting a rise in delinquency.

LegalShield’s Consumer Stress Legal Index (CSLI) also reflects consumer strain that “has settled into a new normal for American households,” according to a LegalShield spokesperson.

The CSLI dipped in Q1 2026 compared to the fourth quarter of 2025. However, the index was 11.6 percent higher than a year ago.

According to the report, the quarter-on-quarter dip was “largely due to seasonal tax refund relief in the Consumer Finance sector.”

“The index remains at an elevated level consistent with sustained, broad-based financial distress.”

The LegalShield Bankruptcy subindex was up 2 percent in Q1, charting an 8 percent year-over-year increase. According to LegalShield, its bankruptcy data has historically served as a leading indicator, preceding actual non-business bankruptcy filings by two quarters with a .95 correlation since 2006.

The Foreclosure subindex was up 20.3 percent year-over-year. That was the highest level since the onset of the pandemic in March 2020. LegalShield called it “the sharpest signal of distress in the current economy.”

“Homeowners are facing severe payment shock driven by escrow resets. National homeowners’ insurance premiums rose 70 percent between 2019 and 2025, now accounting for 14 percent of the average monthly mortgage payment. The principal isn't the problem; the total monthly obligation has quietly reset higher.”

So, when you see mainstream reports touting the “strong consumer,” take them with a grain of salt. Ask yourself, “What data points are they missing or just ignoring?” Because taken as a whole, the data points to a consumer at the end of his proverbial rope.

This underscores a broader point. An economy built on borrowing and spending money for stuff isn’t sustainable. At some point, consumers will crack under the pressure, taking this debt-riddled bubble economy down with them.