Fed Data Signals Consumers Pulling Back on Credit Card Spending

Consumer credit continued to expand in February, though the latest data suggests households are becoming more selective in how they borrow and spend.

Figures from the Federal Reserve released April 7 show that total consumer credit increased at a 2.2% annual rate, up from 1.8% in January. The read across is that borrowing remains a central support for consumption, even as economic expectations weaken.

Nonrevolving credit, which includes auto loans, student loans and personal loans, rose at a 2.8% annualized pace in February. That marked a clear acceleration from the prior month and accounted for most of the overall increase.

These forms of credit are typically associated with planned expenses and longer-term financial decisions. Households taking on these obligations are often financing needs rather than discretionary purchases.

Interest rates across these products have been held within narrow ranges. Credit card APRs remain near 21%, while auto loan rates for common terms stand at roughly 7.5%. Stable borrowing costs, even at elevated levels, appear to be supporting continued use of installment credit for larger purchases.

Credit Card Balances Increase

Revolving credit presents a different picture. Credit card balances increased at a 0.6% annual rate in February, down from 2.3% in January.

The slowdown follows a period in 2025 when revolving balances grew more quickly than other forms of borrowing. The latest data indicates that households are easing a bit on their cards even as cards remain central to everyday transactions.

The diverging trends between installment and revolving credit point to a more deliberate approach to borrowing. Households appear to be reserving credit for specific purposes while exercising more caution with short-term debt.

PYMNTS Intelligence research supports this behavior. More than half of consumers report using credit primarily for planned purchases, while also maintaining access to credit as a fallback for unexpected expenses.

That dual role places credit at the center of household financial management. It is both a planning tool and a buffer, depending on circumstances. When uncertainty increases, the planning function tends to dominate.

There is also evidence that perceptions continue to shape behavior. More than 4 in 10 consumers doubt they would be approved for a new credit card, even though actual denial rates are far lower. This gap can lead some consumers to avoid applying for new credit altogether, limiting growth in revolving balances.

Sentiment Points to Caution

Survey data from the Federal Reserve Bank of New York underscores the cautious tone. Nearly half of respondents, 47%, expect credit to become harder to obtain in the year ahead. At the same time, 36% anticipate their financial situation will worsen over the next 12 months.

PYMNTS’ Consumer Expectations Index adds further context. Households report confidence in managing existing obligations, yet their assessment of current financial conditions remains closer to neutral than positive.

This combination helps explain the moderation in revolving credit. Consumers are maintaining access to credit but appear less inclined to expand balances without a clear need.

For lenders, the trend places greater emphasis on aligning products with specific use cases, whether that involves financing large purchases or providing flexible access to funds in periods of uncertainty. For merchants, it may signal a consumer who remains active but more measured in discretionary spending.

For the broader economy, the implication is that credit remains available and in use, though households are approaching it with greater care.