Revolving Debt Soars in Ominous Sign for Paycheck-to-Paycheck Consumers 

Payment Struggles

Credit card balances are rising as revolving debt surges at double-digit rates.

All of which may signal trouble in the paycheck-to-paycheck economy.

Revolving credit is, of course, an integral part of credit itself. So long as consumers can juggle their monthly payments, not fall behind or move ever closer to their limits — and ding their credit scores — things are manageable.  

But as the balances swell, the pressures to remain current on the debt increase — especially against the backdrop where the central bank has just raised rates, again, which means variable rate debt gets all the more expensive.

As for where credit stands now, the latest data from the Fed shows that credit jumped in March. All told, credit in the aggregate surged by $26.5 billion.

Total revolving debt in March stood at $1.239 trillion, up from $1.2219 trillion in February. On an annual basis, revolving debt was up more than 17% in March, far outstripping the 5.7% annual gain in February and accelerating from the 13.6% annual pace in January.

Spiking Interest Rates

The interest rate charged on credit cards now is 20%, as measured in February, and the rate was 14.5% at this time last year.

PYMNTS data gives a hint of just who’s taking on that debt. As many as 42% of Millennials we surveyed said they’d increased their use of credit products through the past year “significantly.” The same metrics apply to 27% of Gen X consumers.

And that’s for everyday purchases, we note.  

Only 45% of consumers, overall, pay their balances in full, month after month — which in turn means that the majority of consumers still carry a balance. And the average balance we found — cutting across all of our generations of respondents — is more than $4,500. Boomers and seniors carry the highest average balances, at more than $5,100.

As reported in the most recent PYMNTS data chronicling the paycheck-to-paycheck economy,  60% of adult U.S. consumers lived paycheck to paycheck as of March. 73% of millennials describe themselves as living paycheck to paycheck. Among millennials, 87% have at least one credit card, with 84% of cardholders carrying credit card balances.  

There’s at least some indication that credit may be a lifeline to handling life’s (tougher) surprises regarding finances. As we found, 62% of consumers experienced a financially distressing event in the last three years. As many as 74% of Gen Z and 72% of millennials report experiencing at least one financially distressful event.

The cash cushion to insulate against those shocks — and to make credit card payments, too — may face some constraints. millennials have also seen their savings increase into the current year after being flat throughout 2022. In March 2023, millennials reported an average savings of $11,000, compared to $7,300 in March 2022. But overall, we’ve also seen that more than a quarter of consumers had pulled money from savings to help manage their credit card debt.