After two years of extra saving and prudent credit card usage, Americans are spending again.
Credit card balances rose to $916 billion in September, according to data from the credit bureau Equifax. The last time balances were this high was in December 2019, before the pandemic.
Balances fell to a low of $748 billion in April 2021 as consumers pulled back on spending in the early days of the crisis and government stimulus checks helped them pay down debt.
Now, with stimulus checks gone and inflation raising prices on nearly everything, Americans’ credit card spending has jumped more than 20% to reach its pre-crisis level — and it’s on track to surpass that previous all-time high as the holiday shopping season ramps up.
On an earnings call last month, Bank of America CEO Brian Moynihan told analysts that despite expectations that “talk of inflation, recession, and other factors would [mean] slower spending growth…We just don't see [that] here at Bank of America.” Data from the bank shows that credit and debit card spending rose 9% in the third quarter.
Credit card debt is rising amid inflation
But Equifax Risk Advisory Leader Tom Aliff points out that credit card spending actually isn’t growing as fast as experts would expect given how much prices have increased. “It's very healthy growth,” he says.
Equifax data shows the fastest growth in credit card spending is coming from those with higher credit scores — people whose credit ratings agencies deem most likely to pay their bills in full and on time.
On top of that, the average credit utilization rate (the portion of their available credit consumers are using at a given time) for bank-issued credit cards in September was just under 20%, according to Equifax’s data. That’s well below the 30% threshold experts recommend and also lower than December 2019 levels.
Of course, there are also many households who have been forced to turn to credit cards in recent months to help cope with rising prices. That can be expensive if they can't pay off their monthly balances in full: The average credit card rate for people who carry a balance and pay interest was 18.4% in August, according to data from the Federal Reserve. That's roughly two percentage points higher than the average rate in 2021.