In typical months, credit card debt in the U.S. steadily climbs as households rely on revolving credit for everyday purchases. However, during times of economic distress, this trend reverses dramatically. Such shifts occurred during the Great Recession, at the onset of the pandemic, and most recently, in November, when credit card debt saw a surprising decline.
According to the Federal Reserve, revolving debt, predominantly credit card balances, dropped by $13.8 billion in November compared to October, settling at $1.36 trillion. This sharp decrease followed a $15.2 billion increase in October. The annualized 12% dip in credit card debt marked the most significant monthly decline since 2020, and before that, 2010. At the same time, non-revolving debt, including auto and student loans, rose slightly, causing the total consumer debt (excluding mortgages) to fall by $7.5 billion. This decline confounded experts, who had predicted an increase of $9.1 billion based on a survey by Dow Jones Newswires and The Wall Street Journal.
Economists suggest the decline wasn’t necessarily a deliberate choice by consumers. Instead, tightening credit conditions played a key role. A Federal Reserve survey of loan officers revealed that in the third quarter, banks reduced credit limits and raised credit score thresholds for issuing credit cards. This made it harder for some households to accumulate new debt, even if they wanted to. Meanwhile, consumer demand for credit cards remained stable over the same period.
High interest rates may have also discouraged borrowing. In November, the average credit card interest rate stood at 21.5%, just shy of the 21.8% peak reached in August—the highest rate in 30 years. According to Shandor Whitcher, an economist at Moody’s Analytics, these elevated rates, coupled with stricter lending criteria, have significantly curbed borrowing. Whitcher noted that these factors are likely to constrain credit card debt growth through 2025.
The reliance on credit cards has surged in recent years as inflation outpaced wage growth, particularly for lower-income households. However, recent trends in credit card debt remain mixed. While delinquency rates improved slightly in the third quarter, they remain above historical norms, according to a November report from the Federal Reserve Bank of New York.
The November dip in credit card debt highlights how broader economic pressures, such as rising interest rates and tighter lending policies, are shaping household financial behavior. While some consumers may have benefitted from paying down balances, others likely faced limited access to credit in an increasingly restrictive lending environment.
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