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Revolving Credit’s Pace Surges 6.3% in May as Card Spending Continues

revolving credit, personal finances, credit card payments

Consumers were not shy about loading up on the cards in May.

The latest data from the Federal Reserve, released Monday (July 8), show that overall, consumer credit rose $11.3 billion in June, far outstripping the $6.5 billion gain on an absolute and annualized basis. That’s a 2.7% annualized surge. 

But revolving credit — which includes credit cards — notched a 6.3% annualized gain in the month, and now stands at $1.3 trillion. Non-revolving credit, tied to auto loans and student debt, gained 1.4% annualized. 

The Fed’s data noted that interest charged on credit card debt in May stood at a 21.5%, where that rate had been 15% before the pandemic. The revolving debt’s held mostly by depositary institutions, at $1.1 trillion of the $1.3 trillion reported.

PYMNTS Intelligence data showed credit cards remain a key and preferred payment method, especially when it comes to everyday spending. Our research indicates that within the various categories of credit profiles, of the 43% of consumers who revolve their credit, 51% live paycheck to paycheck without issues paying their bills, while 65% of those with issues making ends meet do so.

Within the category of “necessary financers,” those consumers spend $92.64 on groceries with credit cards. The use of credit as a lifeline is underscored by the fact that, as we found, more than six in 10 U.S. consumers who earn below $50,000 annually have less than $500 on hand for medical emergencies.

Some Warning Signs?

There may be some warning signs in the mix. As noted here, amid continued pressure on the paycheck-to-paycheck economy, more consumers are making only the minimum payments on their credit cards.

Accounts that are 30-plus days and 60-plus days past due have hit a high not seen in 11 years, according to fourth-quarter 2023 data from the Federal Reserve Bank of Philadelphia.

PYMNTS’ Intelligence data from December indicated that 57% of credit cards are owned by paycheck-to-paycheck consumers. The same study found that 43% of consumers at least occasionally revolve their credit card balances, while 65% of struggling consumers do so, representing a rise from 59% seen at the end of 2022. 

Forty-five percent of bridge millennials and nearly 41% of millennials revolve their balances. Nearly one in three Generation X borrowers reached their credit limits in the past year. 

Part of the May surge might be explained by travel-related spending, which may be corroborated by bank earnings later this week.  

Headed into the summer months, PYMNTS found that more than a third of consumers turned to credit products to manage their finances, while 21% of them used credit products as their top strategy.

PYMNTS Intelligence also found that 27% of consumers turn to credit cards when they are faced with unexpected expenses totaling $5,000 or more.