Revolving credit grew 6% in June, balances near $1.35 trillion. The risk is that high interest rates compound strain on households already cutting spending.
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Total consumer credit expanded at a 3.3% seasonally adjusted annual rate in June, Federal Reserve data showed Tuesday, reversing a 0.3% contraction in May. The turnaround was concentrated in revolving credit, the category that includes credit card balances. Revolving debt grew at a 6% annual rate after falling 4.7% in May, a swing of nearly 11 percentage points in one month.
The rebound adds to an already volatile borrowing picture. Overall revolving debt jumped at a 10.5% annual rate in April before retreating in May, producing the sharpest monthly swings in more than two years. Across the second quarter, it grew 3.9%, just below the first quarter’s 4.1% pace.
Revolving balances reached $1.351 trillion in June, roughly $1 billion below their October 2024 peak. One more increase of June’s size would take the category to a fresh record. Total consumer credit outstanding rose to $5.167 trillion. Nonrevolving credit, which includes auto and student loans, increased at a steadier 2.3% annual rate. Motor vehicle loan balances rose during the quarter, but student loan balances declined. The slower nonrevolving increase makes the card borrowing stand out: it was not simply households financing more large-ticket purchases.
Revolving credit is the portion of the consumer balance sheet that can expand quickly when monthly cash flow comes up short. Auto and student loans generally finance a specific purchase or obligation. A card can pay for groceries, utilities and other recurring expenses, then carry the unpaid portion into another month. The average rate across all card accounts eased slightly to 20.94% in the second quarter, the Fed said. The rate on accounts actually assessed interest rose to 22.15% from 21.52%.
PYMNTS Intelligence data help explain why some households may be using that option as a bridge. The firm’s survey found that household financial resilience weakened since December, including a 1.9-point decline in consumers’ assessment of whether their debt is manageable. Job-security sentiment improved, but confidence in the next paycheck is not the same as having enough cash left after it arrives.
The pressure is uneven. Among paycheck-to-paycheck consumers who struggle to pay bills and also earn money from side work, 64% said those earnings help cover basic living expenses, PYMNTS found. In that financially strained group, 43% could not cover a $1,200 emergency within a week, 68% had no more than one month of savings, and 45% had none.
The Fed’s aggregate credit data do not show what consumers bought or which income groups added debt. The combination of rising card balances and widespread spending cuts, PYMNTS said, indicates households are using credit to bridge a constrained budget. The firm’s survey showed 53% of paycheck-to-paycheck consumers struggling with bills had cut spending on dining, entertainment, travel and other nonessentials over the past year, compared with 23% who spent more.
June therefore does not signal carefree credit demand. It points instead to an assumption of reliance on a familiar cash-flow tool. The risk is in duration. A card can bridge a timing gap for one billing cycle. At interest rates above 22% for balance carriers, repeated use creates an ever-ballooning expense.
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