Skip to content
undefined

Americans’ Debt Soars in Borrowing Binge

Contributors: Jennifer Surane
Updated on July 14, 10:44 AM EDT

What You Need To Know

Americans are officially borrowing more than they ever have.

Consumer debt soared to $14.64 trillion in the first three months of the year — even as credit card balances notched their second biggest decline on record. That’s because Americans are still sitting on an-ever increasing mountain of student loans and ultra-low interest rates spurred the housing market to new heights.

The amount of outstanding auto loans also reached a record as consumers shied away from public transit and clamored to purchase personal vehicles, despite soaring used car prices.

Even though consumer spending has largely returned to pre-Covid-19 pandemic levels, Americans have reverted to using debit cards more often to travel or dine out. They’re chipping away at checking-account balances buoyed by stimulus money sent out to get the U.S. economy through the pandemic. That behavior has puzzled both bank executives and economists.

Key Coverage

By The Numbers

  • $14.64 trillion outstanding consumer debt
  • 5.23% of that debt is credit-card debt, the lowest level on record
  • 116 million The number of credit inquiries in the past six months - a 3% decline from the previous quarter.

Why It Matters

Consumer spending activity accounts for nearly three-fourths of gross domestic product in the U.S. — so economists are betting on the health of Americans’ finances to lead the economic recovery from here.

For banks, the way Americans spend and borrow matters because they’ve built entire businesses around their immensely profitable credit card offerings and those businesses rely on consumers borrowing for some portion of their revenues. If the pandemic sparks a permanent sea change in the way consumers finance their purchases, it will have real ramifications for the way banks operate.

Delinquencies across all major categories of household debt have dropped precipitously, as people take advantage of repayment moratoriums and keep up with their bills.

“We feel that the consumer is just leaning forward and doing what they can to break out from this sort of lost year that they have had,” Capital One Financial Corp. Chief Executive Officer Richard Fairbank said during an investor conference in June.

    Americans are rapidly paying down their high-interest debt in yet another sign of pent-up demand.

    Timeline