Fed says credit-card balances are rising as borrowing costs stay high

The Federal Reserve says U.S. consumers are taking on more credit-card and auto-loan debt again, but the cost of that borrowing remains high.

In its Monetary Policy Report submitted to Congress on July 10, 2026, the Fed said credit-card and auto-loan balances picked up after slow growth in January and February. The increase was more pronounced for credit cards.

The report assesses developments through the first half of 2026. It is not a new decision to raise or lower interest rates, and it does not mean every household is under financial distress. The Fed said household balance sheets were broadly healthy and aggregate debt remained moderate, while identifying more concentrated pressure among financially vulnerable borrowers.

Borrowing is growing while rates remain high

Federal Reserve consumer-credit data released June 5 showed revolving credit grew at a seasonally adjusted annual rate of 10.4% in April. That is an annualized pace, not a 10.4% increase during April alone.

Credit-card interest rates remained near 21% in the first quarter: 21.00% across all accounts and 21.52% for accounts assessed interest. At those rates, balances can grow quickly when a household makes only minimum payments or uses a card for recurring necessities.

Auto-loan rates had fallen slightly through May, according to the Fed’s July assessment, but remained above 2019 levels. That leaves vehicle buyers facing higher financing costs even when the amount borrowed has not changed.

Lower-income communities face greater auto-loan risk

The Fed also reported increased auto-loan delinquency rates among consumers living in low- and moderate-income census tracts. Delinquency refers to missed-payment status; it is not the same as default, repossession or bankruptcy.

The finding points to an uneven credit picture. Many households may still be managing their debt, while borrowers with less room in their budgets can be more exposed to higher monthly payments, repair bills, insurance costs and other unavoidable expenses.

How large is the household-debt picture?

The Federal Reserve Bank of New York reported total U.S. household debt of $18.794 trillion in the first quarter of 2026. Credit-card debt totaled $1.252 trillion and auto debt reached $1.685 trillion.

The New York Fed also reported that 7.10% of credit-card balances and 2.97% of auto-loan balances flowed into serious delinquency during the quarter. Those quarterly figures should be read separately from the Fed’s description of a pickup in balances later in the year. The New York Fed recorded a seasonal $25 billion decline in credit-card balances from the fourth quarter of 2025 to the first quarter of 2026, while still showing a $70 billion year-over-year increase.

A warning sign among households struggling to get by

Separate Federal Reserve household-survey data found that average credit-card balances rose by more than 35% since 2023 among adults who said they were finding it difficult to get by. That statistic applies to this financially strained group, not to all U.S. adults.

Together, the reports suggest that credit use is supporting some household budgets while increasing exposure to high financing costs. The data do not establish that rising balances alone reflect financial distress, but they show why the burden can become more serious when income is tight or a borrower loses the ability to pay more than the minimum.

What consumers can watch

Readers reviewing card statements should check the annual percentage rate, minimum-payment formula, fees and the expiration date for any promotional rate. If a payment is becoming unaffordable, contacting the lender before missing one may provide more options than waiting until an account becomes seriously delinquent.

Upcoming Federal Reserve consumer-credit releases and New York Fed household-debt reports will help show whether the recent pickup continues or reverses. The key questions will be whether revolving-credit growth remains elevated, whether auto-loan delinquency spreads beyond the communities already identified as higher risk, and whether borrowing costs begin moving closer to pre-2020 levels.

Sources

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