Consumers tapped credit to spend more

February 6 2026

Credit demand surged at the end of 2025. Consumer credit outstanding rose 5.7% at a seasonally adjusted annual rate.

Revolving debt, made up primarily of credit cards, jumped 12.6%. Credit card demand surged in December as the holiday season was compressed into that one month. Retail and food services sales, excluding autos, rose 0.5% in December, according to a measure by the Chicago Federal Reserve Bank; that was up from November and October.

Personal consumption expenditures (adjusted for inflation) have remained strong even as disposable personal income has flatlined. Many consumers are dipping into savings to support spending. High-income consumers are still dominating consumption.

Nonrevolving debt, which includes car loans, student loans and personal loans, increased at an annual rate of 3.2% in December. Auto sales picked up in the final months of the year, buoyed by demand from more affluent households. The year was uneven for the vehicle sector. Everything from tariff concerns to lapsing tax credits for electric vehicles whipsawed demand. 

Student debt continues to compound. The Department of Education recently delayed plans to garnish wages of defaulted borrowers, but many more are expected to go into default. That will stunt demand for credit cards and housing because it lowers credit scores for those who fall behind on their payments. Student loan defaults have hit new highs since the pandemic-era forbearance lapsed.