(Mike Maharrey, Money Metals News Service) Americans spent a lot of money on Christmas, and they put most of it on credit cards.
Now, it appears consumers have put the plastic back in their wallets. Consumer debt grew at a much slower pace in January, returning to the pre-holiday trend of muted borrowing.
The fact that the Debt Black Hole grew more slowly can certainly be viewed as a positive. But if Americans have reached their credit limits and are slowing their spending, that’s really bad news for an economy that depends on people buying stuff to keep limping along.
Consumer debt grew by $8.1 billion in January, a 1.9 percent annual increase, according to the latest Federal Reserve data.
Americans are now buried under $5.11 trillion in consumer debt.
The Federal Reserve consumer debt figures include credit card debt, student loans, and auto loans, but do not factor in mortgage debt. When you include mortgages, U.S. households are buried under a record $18.8 trillion in debt.
The rather modest increase in consumer debt is in line with the trend of slowing borrowing we’ve seen over the last year, as Americans have apparently run their credit cards close to the limit.
KPMG recently reported that the slowing growth of revolving credit likely reflects a drop in borrowing and spending by the bottom 80 percent of U.S. households “that are increasingly stressed.”
“The top 20 percent now account for nearly two-thirds of all consumption. The top 3.3 percent have increased spending the most. Spending has stagnated, adjusting for inflation, among the bottom 80 percent.”
The December growth in consumer debt was more than double the 2.4 percent average growth charted for the entirety of 2025.
Revolving credit balances, primarily reflecting credit card debt, blew up by 11.3 percent in December, as consumers let Visa and Mastercard pay for Christmas. It was the biggest monthly gain in nearly two years.
The pace of revolving credit growth slowed considerably in January, climbing by just $4.7 billion, a 4.3 percent increase.
Americans now owe $1.33 trillion in revolving debt.
The double whammy of rising debt and interest rates exacerbates the debt problem. The average annual percentage rate (APR) currently stands at 19.58 percent, with some companies still charging rates as high as 28 percent. The average is only slightly down from the record high of 20.79 percent set in August 2024, despite Fed rate cuts.
Non-revolving debt, reflecting outstanding auto loans, student loans, and loans for other big-ticket durable goods, also spiked in January, driven by a combination of Christmas spending and new student loans. And like revolving credit, the pace of growth also crashed in January, returning to the slowing trend we saw most of last year with a modest $3.3 billion increase.
The Christmas surge notwithstanding, over the last several months, non-revolving credit has averaged a tepid 2 percent increase rate. Before the pandemic, revolving credit growth averaged 5 percent. It appears consumers are opting not to finance big-ticket items, as more and more of their income is necessary just to pay daily expenses.
Growing Consumer Stress
High levels of debt are stressing many American households, especially those on the lower end of the income scale.
LegalShield’s Consumer Stress Legal Index (CSLI) reflects the strain. As a spokesperson put it, “Financial strain has settled into a new normal for American households.”
The CSLI rose 4.4 percent in the fourth quarter of 2025. It was the third consecutive quarterly increase, pushing the index up 10.4 percent for the year.
The LegalShield Bankruptcy subindex was up 19.9 percent in the second half of 2025, charting a 15.6 percent increase year over year. According to LegalShield, its bankruptcy data has historically served as a leading indicator, preceding actual non-business bankruptcy filings by two quarters with a .95 correlation since 2006.
The Foreclosure subindex was up 15.0 percent year-over-year. According to LegalShield, “The high volume of legal inquiries suggests that homeowners are seeking help to manage rising housing costs.”
Meanwhile, New York Fed data indicate that some households are struggling to keep up with payments on all this debt.
According to the New York Fed, aggregate delinquencies worsened in the fourth quarter. As of the end of 2025, 4.8 percent of all debt was in some stage of delinquency. That was up from 4.5 percent in Q3.
Transitions into early delinquency increased for mortgages and student loans. Transition into delinquency was steady for other debt types.
Transitions into serious delinquency ticked up for credit card balances, mortgages, and student loans while auto loans and HELOC decreased slightly.
Student loan debt has the highest delinquency rate, with 9.6 percent of balances 90+ days overdue. According to the New York Fed, approximately 1 million student loan borrowers who were more than 120 days past due had their loans transferred to the U.S Department of Education’s Default Resolution Group.
Credit card delinquencies are rising, even among consumers with strong credit scores. According to VantageScore, there was a 47 percent year-on-year increase in late payments by people in the prime segment in the third quarter of last year.
As the government showered Americans with stimulus during the pandemic years, many households paid down debt and boosted savings. However, as inflation spiked, Americans blew through their savings and turned to credit cards to make ends meet. The slowdown in debt accumulation could signal that consumers are nearly tapped out. This doesn’t bode well for an economy that depends on people buying stuff to continue limping along.
And even if consumers still have some borrowing power, an economy run on Visa and Mastercard simply isn’t sustainable. When Americans finally hit their credit limit, it will have major implications for economic growth.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
