(Mike Maharrey, Money Metals News Service) Consumer spending is “under strain” according to a recent New York Times report. That’s bad news for an economy that depends on people buying stuff.
We see this consumer strain reflected in the slowing growth of consumer debt.
Consumer spending is the engine that drives the U.S. economy, making up about two-thirds of American economic output. As the Times put it, “The enduring strength of consumer spending…has been the main reason that the United States has evaded a recession through successive drubbings over five years: roaring inflation, a rapid run-up in interest rates and a barrage of tariffs.”
The dirty little secret is that “enduring strength” was courtesy of Visa, Mastercard, Discover, and Amex. And the problem with running an economy on credit cards is a pesky thing called a limit. And it appears Americans are getting close to that line.
Showered with stimulus while having no place to go and little to do during the pandemic lockdowns, Americans saved money and paid down their credit card balances. But as post-pandemic price inflation rocked the economy, they blew through their savings and turned to credit cards to make ends meet.
By the end of 2020, revolving debt, primarily reflecting credit card balances, had dropped below $1 trillion to $979 billion. Today, outstanding revolving debt stands at $1.33 trillion.
However, debt growth has slowed to a crawl over the last year or so.
After several months of slowing credit growth, December was an anomaly, as Americans put Christmas on their credit cards. Revolving debt spiked by 7.4 percent that month. But it slowed again in January, charting a tepid 2.3 percent gain. Revolving credit slowed even further in February, growing by just 0.6 percent, according to the most recent data released by the Federal Reserve.
Looking at the broader trend, the growth of revolving credit has slowed markedly over the last year.
Meanwhile, the personal savings rate is at the lowest level since 2008.
Americans have run up a significant amount of debt in just a few years. They currently owe $5.12 trillion.
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.
Non-revolving debt, reflecting outstanding auto loans, student loans, and loans for other big-ticket durable goods, also spiked in December, 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.
Non-revolving credit rebounded slightly in February, but still only charted a below-average 2.8 percent gain.
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.
Other Signs of 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.
It’s clear that Americans are struggling under the pile of debt. Meanwhile, consumer debt is just one factor contributing to the massive Debt Black Hole dominating the global economy.
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.
