US Consumer Borrowing Rebounded in June, but Underlying Debt Stress Signals Persist

Americans appear to have used tax refunds to pay down credit card balances in May, only to increase their borrowing again in June. While some analysts view the rebound as evidence of a resilient consumer still willing to borrow and spend, the broader data reveals a more concerning trajectory.

June Borrowing Figures

Revolving debt—primarily reflecting outstanding credit card balances—contracted by 4.7 percent in May. In June, it rebounded with a $6.8 billion increase, representing a 6 percent month-on-month gain, according to the latest Federal Reserve data.

Overall consumer debt rose by $14.2 billion in June, reaching a total of $5.17 trillion. The Federal Reserve's consumer debt figures include credit card debt, student loans, and auto loans, but exclude mortgage obligations. When mortgages are included, U.S. households carry a record level of total debt. As of the end of Q1 2025, total household debt stood at $18.2 trillion.

The May contraction in revolving debt coincided with tax refund season, which likely explains the sharp single-month decline in credit card balances, as many households use tax refunds to reduce outstanding debt. However, the May drop also reflects a broader trend: consumer borrowing growth has slowed noticeably over the past year, potentially indicating that consumers are approaching their credit card limits.

Non-Revolving Debt Growth Remains Tepid

Non-revolving credit balances, which cover borrowing for automobiles, student loans, and other big-ticket purchases, rose by a modest $7.4 billion in June—a 2.3 percent increase. Non-revolving debt currently stands at $3.81 trillion.

Growth in non-revolving credit has been subdued for well over a year. It averaged approximately 5 percent before the pandemic but has averaged around 2 percent in recent months. This slowdown suggests consumers have reduced spending on big-ticket items in order to cover the rising costs of everyday necessities. The resumption of federal student loan payments in October 2023, after a pause of more than three years, has also redirected household cash flows toward debt service rather than new purchases.

Given that consumer spending accounts for roughly two-thirds of U.S. economic activity, any sustained decline in consumer spending capacity represents a significant economic concern. Even though borrowing rebounded in June, this does not necessarily indicate increased consumer confidence, as some analysts have suggested. It may equally reflect stressed households relying on credit cards to cover basic expenses. The temporary relief from tax refunds provided only a brief respite.

Pandemic-Era Savings Depleted

During the pandemic, flush with stimulus payments and confined to their homes, Americans paid down credit card balances aggressively. Revolving debt fell below $1 trillion in 2020. At the same time, the personal saving rate surged to 31.8 percent in April 2020—the highest level since the 1960s.

Those savings have since been exhausted. Aggregate savings peaked at $2.1 trillion in August 2021. By June 2023, the San Francisco Fed estimated that aggregate savings had fallen to $190 billion, meaning Americans had drawn down $1.9 trillion in savings in just two years. By March 2024, the San Francisco Fed determined that the entirety of those excess savings had been depleted.

With savings exhausted, Americans increasingly turned to credit cards to manage expenses amid post-pandemic price inflation. Total consumer debt now exceeds $5 trillion. The cost of carrying that debt has climbed sharply as well: the Federal Reserve raised its benchmark federal funds rate by a cumulative 5.25 percentage points between March 2022 and July 2023, pushing average credit card APRs above 20 percent—the highest on record according to Federal Reserve survey data dating back to the mid-1990s.

Delinquency Rates at Post-Recession Highs

According to the latest New York Fed data, 13.1 percent of credit card balances are at least 90 days overdue—the highest level since the late stages of the Great Recession. Serious credit card delinquencies have climbed by 5.5 percent since the third quarter of 2022, a faster pace of deterioration than observed during the 2007–2010 period. Auto loan delinquencies have also been rising, particularly among subprime borrowers, adding another layer of strain to household balance sheets.

NY Fed data also shows credit card balances ticked down in Q1 2026, indicating that consumers have slowed their pace of debt accumulation even as they continue to struggle to service existing obligations. Lower-income Americans are experiencing the greatest financial strain, though affluent areas are also seeing rising delinquency rates.

LegalShield Consumer Stress Index

LegalShield's Consumer Stress Legal Index (CSLI) further reflects consumer financial strain that has "settled into a new normal for American households," according to a LegalShield spokesperson. The CSLI dipped in Q1 2026 compared to Q4 2025, but remained 11.6 percent higher year-over-year. The report attributed the quarter-on-quarter decline to "largely seasonal tax refund relief in the Consumer Finance sector."

"The index remains at an elevated level consistent with sustained, broad-based financial distress," the report stated.

The LegalShield Bankruptcy subindex rose 2 percent in Q1, marking an 8 percent year-over-year increase. LegalShield notes that its bankruptcy data has historically served as a leading indicator, preceding actual non-business bankruptcy filings by two quarters with a 0.95 correlation since 2006.

The Foreclosure subindex was up 20.3 percent year-over-year, reaching its highest level since the onset of the pandemic in March 2020. LegalShield described it as "the sharpest signal of distress in the current economy."

"Homeowners are facing severe payment shock driven by escrow resets. National homeowners' insurance premiums rose 70 percent between 2019 and 2025, now accounting for 14 percent of the average monthly mortgage payment. The principal isn't the problem; the total monthly obligation has quietly reset higher," the report noted.

Taken as a whole, the data points to a consumer under sustained financial pressure. With household debt at record levels, savings depleted, and delinquency rates climbing, the broader picture suggests that the current trajectory of consumer borrowing and spending warrants close attention.