Revolving Credit Up 14.5% in September, Straining Users
September’s revolving credit rose 14.5% annualized, sparking the biggest jump in consumer debt as households stretch budgets, raising worries for lenders.
The Federal Reserve’s G19 report showed that revolving credit – the portion of consumer credit that includes credit cards – grew at a 14.5% annualized rate in September. That surge accounted for more than half of the $28 billion increase in total consumer credit for the month, even though revolving balances represent only about a quarter of all outstanding balances.
Overall consumer credit rose to $5.224 trillion, a seasonally adjusted annual growth rate of 6.4%, up from 1.9% in August. Revolving balances climbed to $1.369 trillion, flipping from a 4.4% annualized decline to the 14.5% rise. By contrast, non‑revolving credit – auto and student loans – slowed to a 3.6% annual rate.
Survey data from PYMNTS Intelligence in October revealed that among cardholders living paycheck to paycheck, 40.7% said they paid their statements in full less often than a year earlier, compared with just 4.5% of those not living paycheck to paycheck.
Why the surge matters
Higher revolving balances mean more interest income for banks. The Fed estimated the third‑quarter average annual rate on commercial‑bank card accounts at 22.36%. For investors, rising balances can boost earnings at major issuers, but they also signal growing credit risk if borrowers struggle to keep up with payments.
From a consumer‑spending perspective, the jump reflects tighter household budgets. Among respondents who said they were paying less often in full, 29.6% blamed rising regular expenses and 27.5% said those expenses exceeded their income. Groceries, utilities and fuel were the most frequently cited pressure points.
Policy‑makers are watching the trend, especially as discussions about credit‑card interest‑rate caps gain traction ahead of the midterm elections.
What it means for everyday card users
Higher interest costs: Carrying a balance now costs roughly 22% annually, which can erode disposable income.
Cash‑flow trade‑off: 13.2% of respondents said they keep more cash on hand instead of paying in full, accepting interest to avoid a payday shortfall.
Purchase decisions: 16.4% delayed or cancelled larger purchases to save money or avoid financing costs.
Debt‑management confidence: Confidence in handling debt fell to 61.1% from 71.2% a month earlier among all cardholders.
For households already living paycheck to paycheck, the shift toward carrying balances can quickly become a financial strain, especially if interest rates rise further.
What to watch next
Analysts will monitor the following indicators in the coming months:
The Fed’s next consumer‑credit report for any change in the growth rate of revolving balances.
Credit‑card delinquency rates, which could rise if income pressures persist.
Legislative action on interest‑rate caps that could affect card issuers’ profit margins.
Consumer‑confidence surveys, particularly among those living paycheck to paycheck.
Continued growth in revolving debt could reshape lender strategies, influence credit‑card pricing, and affect the broader economy’s resilience to a slowdown.
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