Balance Growth Slows as Borrowers Pull Back
Consumers are pulling back from the credit-card binge that took off during the pandemic, as rising debt and high interest rates push many to cut back on discretionary spending.
According to the latest payment data from Visa and Mastercard, growth in credit-card balances—which had surged past $1 trillion after the pandemic—has slowed noticeably. Since late last year, credit-card spending has been rising more slowly than debit-card spending, the first such shift in nearly four years.
During the recent period of high inflation, credit-card issuance and usage spiked as households sought to stretch their budgets. But with student-loan repayments resuming and card interest rates hovering around 22%, household finances have come under pressure. Card issuers are also tightening their standards, targeting wealthier customers.
“Credit-card debt rose at a meteoric pace, but now we’re seeing consumers rein themselves in,” said Charlie Wise, senior vice president at credit-reporting agency TransUnion.
One example is Harry Lee, a 55-year-old San Diego resident, who cut up his American Express Gold Card in February and removed most of his 20 cards from his wallet. Lee said treating credit like “Monopoly money” left him with $72,000 in debt and minimum monthly payments of $2,800—more than his mortgage and car loan combined. In the past six months, he has paid off about $30,000 and now relies only on cash and debit cards.
Debit-card usage had surged during the pandemic as consumers adopted contactless payments and spent government stimulus funds. Credit-card spending, which initially contracted, rebounded sharply in 2022 as travel and dining roared back, growing more than seven times faster than debit.
But in the first half of this year, debit-card spending rose 6.57% from a year earlier, compared with 5.65% growth in credit-card spending, Visa and Mastercard data show.
A TransUnion analysis also found that slower balance growth and declining delinquency rates suggest households are actively managing debt. Personal loans—often used to consolidate card debt—rose 18% in the first quarter from a year earlier, bringing total balances to a record $257 billion.
While such loans offer temporary relief, many borrowers tend to run their card balances back up within 18 months, experts warn.
