BOSTON — Consumer credit rebounded in June as Americans increased their use of revolving debt, including credit cards, even as other indicators suggest financially strained households are cutting discretionary spending and increasingly relying on credit to manage cash flow, according to an analysis by PYMNTS Intelligence.
Total consumer credit increased at a seasonally adjusted annual rate of 3.3% in June after contracting 0.3% in May, according to Federal Reserve data cited by PYMNTS Intelligence.
The increase was driven largely by revolving credit, which grew at a 6% annual rate after falling 4.7% in May. Revolving debt had increased at a 10.5% annual rate in April.
Balances Hit $1.35 Trillion
Revolving balances reached $1.351 trillion in June, about $1 billion below their October 2024 peak, according to the analysis. Total consumer credit outstanding increased to $5.167 trillion.
Nonrevolving credit, which includes auto and student loans, increased at a more moderate 2.3% annual rate.
PYMNTS Intelligence said the stronger growth in revolving debt is particularly notable because credit cards can serve as a readily available source of funds when household cash flow falls short, including for groceries, utilities and other recurring expenses.
Getting More Expensive
Carrying those balances is becoming more expensive. While the average rate across all credit card accounts declined slightly to 20.94% in the second quarter, the average rate on accounts assessed interest increased to 22.15%, up from 21.52%.
PYMNTS Intelligence said its separate research shows household financial resilience has weakened since December, including a 1.9-percentage-point decline in consumers’ assessment of whether their debt is manageable.
Who’s Feeling the Strain
The financial strain is especially pronounced among some paycheck-to-paycheck consumers. Among those struggling to pay bills who also earn income from side work:
- 64% said the additional income helps cover basic living expenses.
- 43% said they could not cover a $1,200 emergency within a week.
- 68% had no more than one month of savings.
- 45% had no savings.
Consumers also appear to be reducing discretionary purchases before turning to additional borrowing. PYMNTS Intelligence found 53% of paycheck-to-paycheck consumers struggling to pay bills had reduced spending on dining, entertainment, travel and other nonessential expenses during the past year, while 23% had increased such spending.
Caution Shared
PYMNTS Intelligence cautioned that Federal Reserve data do not identify what consumers purchased with additional credit or which income groups accumulated the debt. But the firm said the figures are consistent with consumers using revolving credit to bridge household budget gaps as prices rise and savings decline.
The June increase, according to the analysis, is therefore less likely to reflect a surge in carefree discretionary borrowing than greater reliance on credit cards as a cash-flow tool.
The longer that reliance continues, however, the greater the potential financial burden. With rates exceeding 22% for consumers carrying interest-bearing balances, PYMNTS Intelligence said repeated card use to cover budget shortfalls can turn a temporary cash-flow solution into an increasingly costly expense.
