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Key Takeaways
- Consumer credit jumped to another record high in July, rising far more than economists expected.
- More people are relying on credit cards to pay for things as they work to contend with inflation and slowing wage increases.
- The trend of increasing debt could slow as banks have toughened up their standards for lending.
Household debt reached a record high in July as balances on credit cards, auto loans, and other credit continued to mount.
The Federal Reserve said Monday that total consumer debt grew by $25.5 billion to a fresh record high of $5.1 trillion in July. That was well ahead of the $12 billion forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.
Revolving debt, the category that includes credit cards, grew by $10.6 billion, accounting for just under half the growth.
The uptick in household debt highlighted the financial pressure that households face. Many are increasingly relying on credit rather than income to fuel spending as employers pull back on raises in a weakening job market.
July’s jump in credit card debt may be less likely to be repeated in the future, economists at Moody’s Analytics said, noting that many banks have toughened up their standards for credit card lending, according to a separate Fed survey of senior loan officers in July.