US credit card debt rose by $21 billion, or 1.7%, in the second quarter of 2026 to reach $1.26 trillion. The current credit card debt total of $1.26 trillion is just below the record high of $1.28 trillion set in the fourth quarter of 2025.

Total household debt in the United States decreased by $13 billion, or 0.1%, to $18.771 trillion in the second quarter of 2026, according to the Federal Reserve Bank of New York Quarterly Report on Household Debt and Credit. Despite this quarterly dip, total household debt increased by $383 billion compared to the same period in the previous year.

The report detailed divergent trends across major loan categories. Mortgage balances decreased by $74 billion to $13.117 trillion in the second quarter of 2026, while student loan balances decreased by $7 billion to $1.651 trillion. In contrast, auto loan balances grew by $28 billion to $1.713 trillion, and home equity lines of credit (HELOC) balances rose by $13 billion to $459 billion.

Lending activity remained robust in several sectors. Auto loan originations reached $211 billion in the second quarter of 2026, and mortgage originations held steady with $505 billion newly originated during the period. HELOC limits increased by $19 billion in the second quarter of 2026, contributing to broader credit availability. Aggregate credit card limits grew, supported by an $85 billion uptick in credit limits earlier in the year.

About 175 million consumers have credit cards, and roughly 60% carry revolving debt. In early 2026, the average American had $6,595 in credit card debt. The average credit card interest rate was 20.94% as of May 2026. More than half of American consumers carry credit card balances to cover the rising cost of essential expenses, with 25% carrying these debts for six months or longer, according to a recent survey by Achieve.

Economic Policy Advisor Joelle Scally addressed the mixed signals in the data. "Delinquency rates across most products have held steady over the past two years," Scally said. "Still, new delinquencies for auto loans and credit cards remain at elevated levels, a trend we'll continue to monitor."

Transition rates for other loan types varied. Serious delinquency transitions for auto loans stood at 3.00% in the second quarter of 2026, compared to 2.93% a year earlier. Transition into serious delinquency for student loans moved to 7.83% in the second quarter of 2026 from 12.88% in the second quarter of 2025.

Transition rates into serious delinquency for mortgage debt stood at 1.52% in the second quarter of 2026, compared to 1.29% in the second quarter of 2025. The serious delinquency rate for HELOC remained unchanged at 1.15% in the second quarter of 2026. Overall flow into serious delinquency across all debt categories fell to 2.57% in the second quarter of 2026 from 2.91% recorded a year prior.

Lucia Dunn, Professor Emerita of Economics, attributed the rise in credit card usage to economic pressure. "A lot of this is feeding your kids, going into stores, people buying their school supplies, the groceries, the baby formula, the diapers," Dunn said. She noted that many borrowers are forced into revolving debt by necessity. "I’m sure a lot of those people have to carry a balance because they are just simply strapped economically," she said.

Dunn linked the debt accumulation to broader macroeconomic conditions. "A lot of it does have to do with the economy," she said. "We’re sort of in hard times." She warned of the long-term risks for households carrying high-interest debt during economic instability. "Having debt when there’s a downturn is very serious for people, and it can do a lot of harm," Dunn said.

Inflation data provided context for consumer spending pressures. US inflation was 3.4% in July 2026, with prices rising 0.1% in July 2026 from the previous month. The energy index increased 14.7% for the 12 months ending July 2026, while the food index increased 3% over the same period.

Why It Matters

The divergence between falling mortgage and student loan balances and rising credit card and auto debt shows a shift in how American households manage liquidity. With credit card interest rates averaging 20.94% and delinquency transitions for unsecured debt remaining elevated, the reliance on high-cost borrowing for essential goods suggests constrained household budgets. This pattern echoes concerns raised in earlier academic literature, such as the 2008 National Bureau of Economic Research study The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis and the 2015 research Making Firms Liable for Consumers' Mistaken Beliefs: Theoretical Model and Empirical Applications to the U.S. Mortgage and Credit Card Markets, which examined the systemic risks of consumer credit expansion.

The persistence of high debt levels despite slight improvements in overall delinquency rates indicates that financial stress remains concentrated among borrowers using credit cards for daily expenses. Earlier coverage on 2026-06-07 reported that Americans still owed $1.25 trillion on credit cards as interest topped 23%, noting that experts said one call helped over 80% of borrowers get a lower rate. As the total approaches the record set in late 2025, the sustainability of this debt burden under current interest rate and inflation conditions remains a focal point for economic monitoring.