Credit Card Use in US Records Sharp Decline

The slowdown in borrowing suggests households may be shifting from credit-fueled spending to greater caution.

A person uses a credit card at a store in Burlington, N.J., on Feb. 5, 2025. Samira Bouaou/The Epoch Times

Americans’ use of credit cards in the 12 months through August saw its steepest contraction since the COVID-19 pandemic recession, suggesting that the U.S. consumer sector may be shifting from credit-driven resilience toward a more cautious footing.

According to the Federal Reserve’s G.19 Consumer Credit report for August, total consumer credit grew at a negligible 0.1 percent annual rate, a sharp deceleration from 4.3 percent in July. Revolving credit—primarily credit cards—fell at a 5.5 percent annualized rate, while nonrevolving credit, such as auto and student loans, rose by 2 percent, partly offsetting the decline.

The August pullback, the third monthly drop in revolving balances so far this year, left credit card debt 2.5 percent lower than a year earlier—the largest 12-month decrease since the COVID-19 pandemic. By comparison, revolving credit plunged by 10.3 percent between March 2020 and March 2021 as lockdowns, reduced spending opportunities, and federal stimulus payments prompted households to pay down debt and rebuild savings.

The Consumer Bankers Association said in a recent report that credit cards have powered post-COVID-19 pandemic economic growth. In 2022—the latest year of available data—card spending reached $5.83 trillion, accounting for 33 percent of personal consumption expenditures and 22 percent of gross domestic product (GDP). Between 2015 and 2022, card spending as a share of GDP rose by 6 percentage points, underscoring the growing role of credit in sustaining household demand.

That growth helped families navigate inflation and economic volatility while maintaining relatively stable delinquency and payment rates, according to the Consumer Bankers Association. But the Fed’s latest data suggest that this dynamic may be shifting.

Analysts See a Turn Toward Caution

Fergus Hodgson, director of financial consultancy Econ Americas, said the decline in credit card borrowing reflects a change in how consumers view their financial standing.

“While there is not a one-to-one relationship between credit-card borrowing and household spending, it is still tight,” Hodgson told The Epoch Times in an emailed statement. “Any decline in credit limits or credit utilization will hit luxury goods hardest, because the decline suggests a reduced perception of wealth among card users. This is particularly the case because we have not witnessed markedly strong per capita GDP growth.”

Real per-capita GDP grew in the second quarter of 2025 at an annualized rate of 1.45 percent, slightly faster than the first quarter’s 1.28 percent, but slower than 2.14 percent a year earlier.

Dean Lyulkin, CEO of small business lender Cardiff, said the pullback looks more like a healthy reset than a sign of distress.

“The August pullback in revolving credit looks less like panic and more like discipline,” Lyulkin told The Epoch Times in an emailed statement. “After two years of rising balances and record APRs, consumers are finally recalibrating—paying down debt and prioritizing essentials. That’s a healthy adjustment, not a collapse in demand.”

Matthew Nestler, KPMG senior economist, said in a note that consumers in August “demonstrated caution” about taking on more debt, particularly among the bottom 80 percent of households whose real incomes are being squeezed. More affluent Americans now account for two-thirds of all consumption, Nestler said, noting that any pullback among that group could quickly ripple through GDP.

“If sentiment shifts among affluent consumers, consumption and GDP growth may slow,” he wrote. “A red flag would appear if the stock market declines, given how wealth effects stimulate high-end consumption.”

Balance Sheets Hold Steady

Some signs of strain have emerged in consumer credit quality. Credit delinquencies of more than 90 days jumped by 109 percent among super-prime borrowers and 47 percent among prime borrowers, according to a recent report from VantageScore.

“Consumers in the highest VantageScore credit tiers are showing increased signs of credit stress on a year-over-year basis,” Susan Fahy, executive vice president and chief digital officer at VantageScore, said in a statement.

Hodgson said that while the link between credit use and sentiment can vary, broader factors—from technological disruptions to geopolitical instability—are leading consumers to become more cautious.

“There is so much going on at the moment, from technological shocks to geopolitical uncertainty, I would not blame consumers for tightening their belts,” he said. “Revisions to macroeconomic data have revealed their inaccuracies and contorted presentation. Such confusion dampens confidence in the U.S. trajectory.”

Recent consumer confidence data support that view. The Conference Board’s September survey showed sentiment falling to its lowest level since April as perceptions of job availability weakened sharply. Write-in responses showed a rise in references to jobs and employment to the highest level in more than a year.

“The comments were mostly negative, especially when referring to the current situation,” the Conference Board report stated. “There were a few positive comments which mostly conveyed hopes that things would get better.”

Still, Bank of America economists say that household balance sheets remain in solid shape.

“Given the slower labor market and other cost pressures, how are people, regardless of generation, faring financially? We believe they are in fairly good shape,” the economists wrote in a recent report. “For now, the recent slowdown in the labor market is not obviously being reflected in households’ overall finances.”

Bank of America’s internal data show that household spending remains steady, with credit and debit card outlays rising for a third consecutive month. Most households also retain sizable cash buffers, suggesting that the Fed’s reported credit slowdown reflects prudence rather than distress.

Looking beyond the short-term credit cycle, Hodgson said the current pullback is part of a long-running structural adjustment rooted in fiscal imbalance.

“Another government shutdown makes us aware of fiscal recklessness and mismanagement from the U.S. federal government,” he said. “The debt burden on the productive economy continues to grow, and I foresee the new normal of modest growth continuing long into the future.”