Average Credit Card Debt Is Up By More Than a Quarter: What That Means for Americans’ Wallets and the Economy

U.S. credit card debt per borrower rose to $6,371 in Q1 2025, a 26% increase from $5,026 in Q1 2022, driven by high inflation; however, the rate of increase has slowed since 2023. TransUnion data indicates an increased reliance on credit, particularly among subprime borrowers, while a Federal Reserve Bank of St. Louis report highlights rising delinquency rates, especially in lower-income areas, which could foreshadow broader economic challenges and potential recessionary pressures.

Analysis

U.S. consumer credit trends present a mixed but concerning picture, with average credit card debt per borrower rising to $6,371 in Q1 2025, a 26% increase from $5,026 in Q1 2022, primarily driven by historically high inflation. While the annual growth rate of this debt has moderated to 2.5% year-over-year in Q1 2025—a slowdown from 8.5% in 2024 and 14% in 2023—and inflation-adjusted total consumer credit balances grew by a more modest 3% from Q1 2020 to Q1 2025, the persistence of debt accumulation despite rising wages and low unemployment is notable. TransUnion's analysis highlights an 'increased reliance' on credit, particularly among subprime borrowers who have acutely felt the impact of higher costs. Furthermore, a Federal Reserve Bank of St. Louis report from May 9th indicates that the share of individuals 30 days delinquent on credit card payments has trended upward since the first half of 2021, with delinquency rates in the lowest-income areas growing by 63% between Q2 2021 and Q1 2025. This persistent growth in delinquencies, even if the pace has slowed since early 2024, is identified as a potential precursor to broader economic challenges and may signal heightened recession risk.

Key Decisions for Investors

• Investors should closely monitor consumer credit delinquency rates and overall household debt levels as key leading indicators of potential economic stress and a slowdown in consumer spending.
• Consider scrutinizing exposures to financial institutions with significant unsecured consumer loan portfolios, particularly those catering to subprime borrowers, given the observed rise in delinquencies and reliance on credit in this segment.
• While the deceleration in the rate of credit card debt growth is a marginal positive, the sustained increase in delinquencies warrants a cautious outlook on sectors highly dependent on consumer discretionary spending and overall consumer financial health.