Credit card balances are ticking higher in 2025, according to a new quarterly report on household debt from the Federal Reserve Bank of New York.
Balances rose by $27 billion in the second quarter to a collective $1.21 trillion — in line with last year’s all-time high. The total is up 2.3% from the previous quarter.
At the same time, “we are still seeing elevated delinquency rates for credit cards,” the New York Fed researchers found, with 6.93% of balances transitioning to delinquency over the last year.
“This looks to be a little bit of catch up,” the researchers said on a press call Tuesday, in part due to “unusual leniency during the pandemic” and because consumers “may have overextended themselves” as inflation spurred higher costs in the years since.
“Those are things we have been keeping an eye on,” the New York Fed researchers said.
Credit card debt had remained stable for decades. However, in the years since the pandemic, households largely spent down their excess savings while the cost of living jumped, which sparked a sharp rebound in credit card balances.
‘A growing K-shaped split’
Separate data from Equifax found that many consumers continue to spend, despite elevated prices and high borrowing costs, while credit card delinquency rates remain relatively flat.
But subprime borrowers show signs of strain, with a rising share of the overall debt, according to Equifax. Subprime generally refers to those with a credit score of 600 or below.
“There’s a growing K-shaped split in the consumer landscape, with subprime borrowers falling behind,” Tom O’Neill, market pulse advisor at Equifax, said in a statement.
Many subprime borrowers are younger cardholders with shorter credit histories. These are also the borrowers more at risk of facing debt repayment challenges now that the Trump administration has restarted collection efforts on defaulted federal student loans.
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“I think most people are generally doing OK, but it wouldn’t take much for them to not be OK,” said Matt Schulz, chief credit analyst at LendingTree. “So many Americans are a job loss, income reduction or medical emergency away from real financial trouble.”
On the other side of the divide, just over half of cardholders — or 54% — typically pay in full, thereby avoiding interest, according to another report by Bankrate. “Their card usage is counted among balances but isn’t true debt like the other 46% of cardholders are facing,” said Ted Rossman, Bankrate’s senior industry analyst.
By way of example: With annual percentage rates just over 20%, if you made minimum payments toward the average credit card balance ($6,371), it would take you more than 18 years to pay off the debt and cost you $9,259 in interest over that time period, Rossman calculated.
“There’s a huge difference between someone who uses credit cards for rewards and convenience versus someone who is carrying pricey debt for years.”