Consumers took on more debt to start the year

March 6, 2026

Credit demand growth remained positive to start 2026, though it missed consensus estimates. Consumer credit outstanding climbed 1.9% at a seasonally adjusted annual rate in January, following an upwardly revised 6% in December. 

Revolving debt, made up primarily of credit cards, climbed 4.3% after a surging 11.3%  December’s shortened holiday season. Retail sales lost ground in January as winter weather kept shoppers home—although that did not keep people from shopping online.

Nonrevolving debt, which includes car loans, student loans and personal loans, increased at an annual rate of 1.1% in January. Used auto sales were soft in January as the same winter weather that muted everyday shopping affected big-ticket purchases. Used auto sales bounced back in February and will provide a boost to consumer credit. 

The rebound in used auto purchases is likely driven by lower- and middle-income consumers who have been priced out of buying a new car. The personal saving rate hit a three-year low in the fourth quarter as consumers keep spending.

Affluent consumers continue to support broader spending in the economy though there has been evidence of a turnaround in spending by lower income consumers. Larger tax refunds, increases in the minimum wage in many states and the end of the government shutdown will support consumers in the first two quarters of 2026. The tax refunds could be used to pay down existing debt.

Student debt continues to mount. A growing number of student loans are expected to enter default, which will lower credit scores and cause a pullback in demand for autos, housing and credit cards. Student loans entering seriously delinquency (90+ days late) have topped 16%, significantly higher than pre-pandemic.