Credit Card Debt Grows As Normalcy Returns, Fed Says

Consumers racked up card debt for a second consecutive quarter

Woman holds credit card while shopping online with man at her side

Jose Luis Pelaez Inc. / Getty Images

How’s this for a sign of things getting back to normal: Americans are racking up billions in credit card debt again.

Key Takeaways

  • Credit card spending increased for a second consecutive quarter, marking the return of normal seasonal patterns disrupted by the pandemic last year, Fed researchers said. 
  • After consumers paid down credit card debts significantly in previous quarters, balances are growing again.
  • New mortgages and auto loans increased by near-record levels, driven by high prices for houses and cars.

Credit card balances increased by about $17 billion for the second quarter in a row, marking a return to normalcy, according to a quarterly report on consumer debt and credit released Tuesday by the Federal Reserve Bank of New York. While total credit card debt remains far below pre-pandemic levels, the uptick is a distinct contrast from the “wild gyrations” in card debt seen earlier in the pandemic when balances suddenly plummeted, researchers said. 

“It looks much more like a reversion to the norm,” a Fed researcher said in a background call with reporters. “You can see the return of a much more normal pattern of consumption and personal income growth being reflected in the ways credit card balances evolved.” 

Credit card debt plunged when the pandemic hit in 2020, as business closures left consumers with nowhere to spend and household finances were bolstered by stimulus payments and unemployment checks from the government. But this year shoppers began running up their bills again in the quarter ending in June, a trend that continued through the third quarter ending in September.

That’s a typical pattern: Consumers routinely accumulate large amounts of credit card debt in the fourth quarter due to holiday shopping, pay it off in the following quarter, and then gradually ramp back up again throughout the year.

Not only are consumers more willing to borrow these days, but banks are more inclined to lend to them. Financial institutions loosened their standards for mortgages, car loans, and credit cards in the third quarter, according to the findings of a separate quarterly survey of senior loan officers released Monday by the Federal Reserve.

Not everything was back to business as usual, however, according to the report on household debt and credit. A near-record $199 billion increase in new auto loans and leases (second only to the previous quarter) came mainly from the surge in the price of cars rather than increased sales. Consumers additionally took out $1.1 trillion in new mortgages, also a tad less than the record set the previous quarter, with the elevated amount likely due more to spiking home prices than to an increase in sales, Fed researchers said.

Fewer borrowers were behind on their payments, at least on paper. Delinquency rates—already at far below pre-pandemic levels because of forbearance programs such as the pause on student debt that ends in February—continued to decline across most loan types. There was a slight uptick in delinquent mortgages, however, due to the end of government forbearance programs in September.

Nov. 10, 2021: The sixth paragraph has been corrected after misstating the source of the survey of senior loan officers report as well as the day of its release. The story was originally published on Nov. 9.

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  1. Federal Reserve Bank of New York. “Quarterly Report on Household Debt and Credit.”

  2. Federal Reserve. “Senior Loan Officer Opinion Survey On Bank Lending Practices.”

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