Consumer credit is still growing, but consumers eased off the form of borrowing they can adjust most readily from month to month.
Federal Reserve data released Wednesday (Oct. 7) show consumer credit expanded at a seasonally adjusted annual rate of 1.9% in August, less than half July’s revised 4.1% pace and the slowest since May. Total outstanding credit rose to $5.197 trillion from $5.189 trillion.
The growth came from nonrevolving credit, which includes auto and student loans. That segment increased at a 4.1% annual rate, down only modestly from a revised 4.7% in July and well above its pace during much of late 2025 and early 2026. Nonrevolving balances reached $3.844 trillion in the latest reading.
Part of the increase reflects the calendar. Federal government-held consumer credit, almost entirely student loans, climbed to $1.622 trillion from $1.608 trillion. The increase is consistent with late-summer student-loan disbursements before the fall academic term.
Revolving credit went the other way.
The category, which includes credit card balances, contracted at a 4.2% annual rate after expanding 2.5% in July. Revolving balances fell to $1.352 trillion from $1.357 trillion, retreating from the record reached a month earlier. August produced the steepest monthly decline in at least the past year.
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A single month cannot establish that consumers have fundamentally changed how they use cards. The recent history is too uneven. Revolving credit grew at a 10.5% annual rate in April, contracted in May and rebounded at a 6% rate in June.
Still, August adds another data point to a broader picture of consumers becoming more selective about debt. PYMNTS Intelligence data provides additional context for the pullback. Among paycheck-to-paycheck consumers struggling to pay bills, 53% said they had reduced spending on dining, entertainment, travel and other nonessential purchases during the previous year, while 23% said they had increased such spending.
Our data also including a 1.9-point decline in consumers’ assessment of whether their debt was manageable. Among financially strained paycheck-to-paycheck consumers with side income, 43% could not cover a $1,200 emergency within a week, 68% had no more than one month of savings and 45% had no savings.
PYMNTS Intelligence’s Pay Later research indicate that stretching payments over time remains top of mind for a significant swath of consumers. Credit card installment plans were used by 23% of consumers in April 2025 and 36% by March 2026, while BNPL use remained around 15%.
The installment options represent a different way of organizing repayment, allowing a purchase to be divided into scheduled payments instead of simply remaining on an open revolving balance.
What comes next will depend partly on whether consumers keep separating access to credit from carrying expensive balances. Card borrowing costs moved higher in the third quarter, with the average APR on accounts assessed interest reaching 22.36%, up from 22.15%. New-car financing also became more expensive, with the average rate on 60-month loans rising to 7.54% from 7.14%. The price of borrowing is giving households another reason to weigh each financing decision carefully.
Higher borrowing costs are also reaching consumers making larger financed purchases. The average rate on a 60-month new-car loan rose to 7.5% in the third quarter from 7.1%, while the rate on a 72-month loan increased to 7.2% from just under 7%. Personal-loan rates were comparatively stable at 11.9%. The mounting cost of debt adds additional considerations for households deciding whether to finance a purchase, extend the repayment period or wait before taking on a new obligation.
At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.
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