Credit Card Usage Jumps as Consumers in July Add $10.4 Billion in Debt

After falling slightly in June, consumers added more credit card debt in July, as revolving credit shot up $9.6 billion in the Federal Reserve’s monthly report on consumer credit.

Total consumer credit increased $10.4 billion, which includes an increase of $773 million for non-revolving credit, like auto and school loans, bringing total U.S. outstanding consumer credit to $4.98 trillion. Of that, $1.27 trillion is in revolving credit, which includes credit cards, home equity lines of credit, and other lines of credit.

The data comes after a New York Federal Reserve report found total U.S. credit card debt passed $1 trillion for the first time. Despite coming down from more than 9% in June 2022, inflation remains above 3%, as higher prices are helping push consumers into more debt. 

Inflation Pushing Debt Higher, Retailers Feeling the Pinch

Higher credit card debt is a product of inflation, said Mindy Yu, Director of Investing at Betterment at Work. She pointed to a study by Betterment that found that credit card debt was the second highest source of stress for people, behind the increased cost of living created by inflation, which she said were tied together.

“Against the macrotrend of higher inflation, what we have been seeing is people are trying to pay for expenses using a credit card after their emergency savings have been used,” she said. 

Retailers are also reporting problems with credit, said Michael Hershfield, founder and CEO of Accrue Savings, a company that’s working to create co-branded savings plans with retail outlets that will let customers save toward purchases as an alternative to credit.

Credit delinquencies were a problem that Nordstrom particularly focused on in its recent earnings report, Hershfield said, and Macy’s and Kohl’s have also said they could see revenue challenges from lagging consumer credit. Store credit cards can also indicate further credit problems to come. 

“Retailers are signaling to the market that the consumer is in pain,” he said. “There is a slice of the American population that is having a hard time paying their credit cards, and co-branded store credit cards are the first to go when they are in pain.”