U.S. Consumers Increase Use of Credit Cards and Personal Loans as Persistent Inflation Squeezes Budgets

U.S. households leaned more heavily on revolving and installment credit during the second half of 2025, according to new data showing brisk growth in both credit card openings and personal loan originations. The shift toward additional borrowing coincided with price levels that remain substantially higher than before the pandemic, despite recent signs that inflation is easing.

Figures released by credit-reporting firm TransUnion indicate that issuance of personal loans climbed 24% in the third quarter of 2025 compared with the same period a year earlier. The expansion was led by consumers in the lowest credit tiers, a cohort often referred to as subprime, suggesting that financially vulnerable borrowers felt the greatest need to tap new funds. At the same time, new credit card accounts rose 11.7% year over year, with growth powered by both subprime applicants and the most creditworthy “superprime” households.

The appetite for fresh credit lines emerged against a backdrop of elevated living costs. Although headline inflation has cooled from the peaks registered in 2022, overall prices in January 2026 were still roughly 26% higher than in January 2020. Wage gains have partially offset the jump, yet many workers report that pay increases have not fully matched the accumulated rise in everyday expenses. Lingering unease about the labor market has added to the pressure, contributing to a downbeat mood among consumers throughout 2025.

“Just because the monthly inflation reading has come down doesn’t erase the run-up that happened beforehand,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion, in the accompanying release. According to the company, more households have been turning to credit products to bridge the gap between incomes and higher price tags.

Rising reliance on borrowed money has been accompanied by a measurable uptick in repayment stress. The Federal Reserve Bank of New York’s quarterly report on household debt shows that 12.7% of credit card balances were at least 90 days delinquent in the fourth quarter of 2025, marking the highest level of serious credit card delinquency since 2011. Late-stage delinquencies on other forms of consumer debt, while lower, also crept higher over the course of the year.

The combination of additional borrowing and slower repayment has pushed total outstanding credit card balances to fresh highs. TransUnion’s database records a 4.2% increase in card balances at the end of 2025, extending a streak of similar quarterly gains that began earlier in the year. Aggregate personal loan balances reached a record $276 billion, though the average balance per account remained nearly unchanged at around $8,400, roughly in line with the 2024 figure.

Industry analysts note that the split between revolving and installment debt highlights different consumer strategies. Credit cards offer flexibility and rewards but carry variable interest rates that have climbed alongside the Federal Reserve’s policy tightening cycle. Personal loans, typically issued at fixed rates over set terms, allow borrowers to consolidate higher-interest obligations or finance big-ticket items with predictable payments. The surge in both products suggests that households are employing multiple tactics to navigate cost pressures.

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Looking ahead, TransUnion expects demand for new credit card accounts to cool in 2026 as the economy settles into a slower but steadier growth pattern. Whether that moderation materializes will depend in part on the trajectory of inflation and the strength of the job market. A sustained easing of price growth could give households room to rebuild savings, but any renewed spike might prompt another wave of borrowing.

The stakes are rising for lenders as well. Elevated delinquencies can erode profit margins and force issuers to tighten underwriting standards. Some large banks have already increased loan-loss provisions, anticipating that more borrowers could struggle if interest rates stay high. Credit scoring models, meanwhile, are being recalibrated to account for recent payment behavior and higher living expenses, potentially limiting access for riskier applicants.

Policymakers are watching consumer credit trends for clues about the broader health of household finances. The Federal Reserve tracks debt burdens and delinquency rates alongside employment and inflation data to gauge whether monetary policy is constraining spending too sharply or allowing excessive leverage. Economists at the Federal Reserve Board note that credit growth can both support consumption and amplify downturns if households become overextended.

For the moment, consumers appear to be balancing on a narrow path: tapping additional credit to manage higher costs while trying to keep payments current. How long that balance can be maintained may hinge on further progress in reducing inflation and on the pace of wage growth in 2026.

Crédito da imagem: TransUnion