Revolving Credit Rates Rise as Everyday Expenses Pinch Consumers

The Federal Reserve’s latest G.19 consumer credit report showed consumer credit increased at a seasonally adjusted annual rate of 5.8% in March, a significant acceleration from February’s 2.1% pace. For the first quarter overall, consumer credit expanded at an annualized rate of 3.2%, with revolving credit, which includes credit cards, emerging as the primary driver of the increase.

The data points to a consumer still willing — or increasingly required — to borrow despite elevated interest rates, persistent inflation pressures and what PYMNTS Intelligence has found to be uneven confidence across income groups. Total consumer credit outstanding climbed to $5.14 trillion in March, up from $5.12 trillion in February. Revolving balances reached $1.34 trillion, while nonrevolving balances such as auto and student loans totaled roughly $3.8 trillion.

Credit Cards Drive the Rebound

The sharpest movement came from revolving debt. Revolving credit rose at a 9.1% annual rate in March after barely growing in February, when it increased just 0.3%. The pace marked one of the strongest rebounds in revolving borrowing since 2022, according to the Fed data.

As PYMNTS has reported, credit card balances tend to rise when consumers use cards to bridge gaps between income and expenses, finance discretionary purchases or absorb rising everyday costs.

At the same time, the cost of carrying that debt remains elevated. The Fed reported that credit card APRs averaged 21% during the first quarter, holding near historically high levels despite easing inflation trends.

The broader picture suggests consumers have not retreated from spending, but the composition of that spending may be changing. PYMNTS Intelligence data indicates many households are using credit not for large aspirational purchases, but for routine financial management and essential spending. Consumers are viewing credit as a tool for flexibility and cash-flow management. Among subprime consumers, essential purchases outweighed discretionary spending by a wide margin, highlighting how credit cards and installment options are being used to absorb everyday expenses rather than occasional splurges.

Nearly 60% of consumers said they want adaptable rewards and payment options, while installment features tied to everyday spending are gaining traction.

Different Debt, Different Speeds

While revolving balances accelerated sharply, nonrevolving credit also expanded, though at a slower pace. Nonrevolving debt, including auto loans and student loans — increased at a 4.7% annual rate in March, up from 2.7% in February.

Student loan balances continued to climb, reaching about $1.87 trillion during the quarter, while motor vehicle loans remained relatively stable near $1.56 trillion.

The divergence between revolving and nonrevolving debt growth may reflect how households are adapting to higher rates and economic uncertainty. Auto lending has slowed across the industry as vehicle affordability pressures persist, while student debt remains structurally elevated following the resumption of repayment obligations.

Credit cards, by contrast, remain immediately accessible and deeply embedded in everyday commerce. PYMNTS Intelligence research found that mobile credit card apps are influencing which cards consumers use most frequently and how often they spend. Nearly 7 in 10 cardholders said app quality influences which card becomes their “top of wallet,” with that figure rising to 87% among Gen Z consumers.

The same report found that 32% of consumers increased spending on a card after adopting its mobile app, underscoring how digital engagement and card usage are becoming intertwined.

That spending activity, however, is unfolding against a backdrop of uneven financial confidence.

A separate PYMNTS report found a 15-point confidence gap between high- and low-income households, with consumers earning more than $150,000 posting significantly stronger financial outlook scores than households earning under $50,000.

Lower-income households continue managing debt and bills, but often without substantial emergency savings or financial flexibility. The report noted that many consumers remain disciplined about debt management even as economic pressure persists.