On Tuesday, August 5th, the Federal Reserve Bank of New York’s Microeconomic Data Center released the “2025 Second Quarter Household Debt and Credit Report.” According to the report, credit card debt in the second quarter increased by $27 billion, reaching $1.21 trillion, remaining at the same high level as the same period last year.
At the same time, researchers found that the credit card default rate remained relatively stable, with 6.93% of the credit limits marked as default over the past year.
According to CNBC’s report, researchers stated at a press conference on Tuesday that this was due to the “abnormally loose policies during the pandemic” and consumers potentially “overleveraging” due to rising costs caused by inflation. They added that it was a problem they had been closely monitoring.
For the past few decades, credit card debt has remained stable. However, post-pandemic, households have depleted excess savings while facing a sharp increase in living costs, leading to a rapid rebound in credit card balances.
The report showed that total household debt in the United States increased by $185 billion (1%) in the second quarter of 2025, reaching $18.39 trillion, setting a new historical high.
Joelle Scally, an economic policy advisor at the New York Fed, mentioned, “Household debt in this quarter has reached a critical default situation, varying by debt type, with credit cards and auto loans remaining stable, student loans continuing to rise, and mortgage loans slightly increasing. Although the mortgage default rate has recently risen slightly, overall performance remains solid by historical standards.”
The report indicated growth across various types of debt in the second quarter: mortgage loan balances increased by $131 billion, reaching a total of $12.94 trillion; credit card debt rose by $27 billion to $1.21 trillion, a 2.3% increase from the previous quarter; auto loan balances grew by $13 billion, totaling $1.66 trillion; student loan balances increased by $7 billion, amounting to $1.64 trillion.
Furthermore, according to a report from Equifax, a consumer credit reporting agency in the United States, despite rising prices and borrowing costs, many consumers continue to spend, while the credit card default rate remains stable.
However, subprime borrowers (generally referring to individuals with credit scores below 600) are showing pressure, with their debt-to-income ratios rising, leading to a “K-shaped divergence.”
These borrowers are mostly young cardholders with shorter credit histories, especially facing greater debt repayment challenges after the Trump administration resumed federal student loan default collections.
Tom O’Neill, a market insights advisor at Equifax, mentioned, “The K-shaped divergence in the consumer market is becoming more apparent, with credit score trends reflecting this disparity. We see more and more consumers improving their scores, while an increasing number are sliding into lower levels.”
This divergence highlights the challenges faced by different segments of consumers in the current economic environment.