US Household Debt Hits Record $18.6 Trillion, Flashing Warning Signs
A surge in credit card balances and rising delinquency rates suggest mounting pressure on consumers, posing a headwind for future economic growth.
Total U.S. household debt climbed to a new peak of nearly $18.6 trillion in the third quarter, as consumers increasingly leaned on credit to manage persistent inflation and higher borrowing costs. The record-setting figure raises new questions about the sustainability of consumer spending, the primary engine of the American economy.
The increase was detailed in a recent report highlighting data from the Federal Reserve Bank of New York, which showed a $197 billion jump in total debt from the prior quarter. While mortgages remain the largest component, swelling by $137 billion to reach $13.07 trillion, a more troubling trend is emerging in high-interest revolving credit. Credit card balances rose by $24 billion to a record $1.23 trillion, signaling that more households are using credit to cover essential expenses.
Beneath the headline number, signs of financial strain are becoming more evident. Aggregate delinquency rates are on the rise, with 4.5% of all outstanding debt now past due. The transition into serious delinquency (90 days or more) is particularly acute for student and auto loans. Following the end of pandemic-era forbearance programs, student loan delinquencies have surged, with 9.4% of balances now at least 90 days late, according to New York Fed data. This reversal marks a significant challenge for millions of borrowers now facing resumed payments.
Credit card delinquencies have also climbed to their highest levels since 2011, a clear indicator that the combination of elevated prices and high interest rates is taking a toll. Data analysis from alternative lending platform RadCred shows that 44% of borrowers report their monthly debt payments now consume over 35% of their net income.
"The resilience of the American consumer has been a key theme this year, but these figures suggest that resilience is being funded by debt," commented a senior economist at a major financial institution. "That's a finite resource, and we are seeing the first signs of it being stretched thin."
This mounting debt burden presents a significant headwind for the U.S. economy heading into the crucial fourth-quarter holiday season. Economists are closely watching for a potential pullback in discretionary spending as households are forced to allocate more of their income to servicing debt. Several forecasts now point to a slowing of GDP growth in the final months of the year, driven by weaker consumption.
The situation creates a delicate balancing act for the Federal Reserve. After a series of aggressive interest rate hikes to combat inflation, the central bank must now weigh the risk of further straining household finances against the need to keep prices stable. With delinquency rates rising, any further economic softness—such as a weaker job market—could accelerate financial distress.
For now, the labor market remains relatively robust, providing a critical backstop for consumers. However, with savings rates dwindling and debt levels at an all-time high, the financial health of the American household will be a key determinant of the economy's trajectory into 2026.