In the first quarter of 2026, credit card balances decreased by $25 billion to $1.25 trillion, as reported by the Federal Reserve Bank of New York. Despite this decline, credit card debt is still up 5.9% compared to the same period last year.
The report indicates that while credit card balances typically fall after the holiday season, other forms of household debt, including mortgage debt, auto loans, and home equity lines of credit, have increased. Daniel Mangrum, a research economist at the New York Fed, noted that overall household debt levels rose slightly due to these modest increases in various debt types.
The report highlights a growing concern regarding household budgets, particularly as gas prices have surged to an average of $4.50 per gallon, up from $3.14 a year ago. This increase in gas prices has led to financial strain, especially among low-income families, who have had to reduce their gas consumption.
The New York Fed's researchers pointed out a 'K-shaped' economy, where higher-income households maintain spending levels while lower-income households face challenges. Christian Floro, a market strategist at Principal Asset Management, emphasized that delinquencies are primarily driven by subprime borrowers, while prime borrowers have seen only minor credit performance deterioration.
However, the recent spike in gasoline prices could exacerbate delinquency rates. National Economic Council Director Kevin Hassett remarked on the high levels of credit card spending, suggesting that consumers are spending more across various categories, not just on gas.
A report from debt management company Achieve revealed that 53% of consumers carry credit card balances to manage essential expenses, indicating that rising balances may reflect economic struggles rather than optimism. Among those who are behind on payments, 57% reported it would take them six months or longer to pay off their credit card debt