Credit card balances fell by $25 billion in the first quarter of 2026 to $1.25 trillion, according to a new report on household debt released by the New York Fed on Tuesday. However, this is still an increase of 5.9% compared to the previous year.
At the same time, mortgage debt, auto loans and home equity lines of credit all increased, the New York Fed said.
“Household debt levels rose slightly overall, with modest increases across most debt types offsetting seasonal declines in credit card balances,” New York Fed research economist Daniel Mangrum said in a statement.
Credit card debt often mounts near the end of the year as consumers increase spending during the peak holiday shopping season. After that, it usually dips in the first quarter.
Even though credit card debt is decreasing, rising gasoline prices are putting increasing pressure on household budgets.
The average price for a gallon of regular gasoline nationwide was $4.50 on Tuesday, up from about $3.14 a year ago, according to AAA.
A separate report from the New York Fed earlier this month found that higher-income households maintained their March spending levels, while lower-income households were forced to cut back on gas consumption and were still feeling an increased financial burden.
“Overall spending growth is increasing,” New York Fed researchers said at a press conference Tuesday. However, there is evidence of a “K-shaped” economy in credit card balances.
“While Americans as a whole are generally on fairly stable footing, there are some weaknesses among low-income households,” the researchers said. They added that “some of that is seen in the delinquency rate” regarding the percentage of borrowers who are behind on their payments.
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Christian Frollo, market strategist at Principal Asset Management, said this divergence is likely to continue as the economy becomes increasingly polarized.
“While some consumers, primarily subprime borrowers, are driving most of the increase in delinquencies, prime borrowers have experienced only a modest deterioration in their credit performance,” Frollo said.
However, he added, “The recent gas price shock could further increase the arrears.”
“Credit card spending is increasing by an order of magnitude.”
National Economic Council Director Kevin Hassett said last week that credit card spending is a sign that consumers have more money.
“Credit card spending has increased by an order of magnitude,” Hassett told Maria Bartiromo on FOX Business. “They’re spending more on gas, but they’re also spending more on everything else.”
More than half (53%) of consumers carry credit card balances to cover necessary expenses, according to a report released Tuesday by debt management firm Achieve.
“For many households, rising balances are not a sign of economic optimism, but rather a sign that wages and savings are struggling to keep up with necessities like groceries, utilities and housing,” Austin Kilgore, an analyst at the Achieve Center for Consumer Insights, said in a statement.
Among respondents to a survey of 2,000 consumers conducted by Achieve, 57% of borrowers said it would take more than six months to pay off all their credit card debt.
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