As the holiday spending season ramps up, there are numerous signs that the strains U.S. consumers felt the last two years are easing.
Consumers are still racking up credit card debt, but at a far slower pace than in the two previous years. Spending is growing, but not at alarmingly high levels — a notable shift after a bout of inflation that took a toll on lower-income consumers.
And while some borrowers are late on their credit card bills, the post-pandemic increase in consumers falling behind seems to be tapering off.
"For 2025, we're seeing a lot of stability in delinquencies," said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.
The return to a more normal environment — assuming the U.S. economy stays on track — would be a massive shift from the volatility of the last five years.
Many consumers' financial health was about the best it's been during 2020 and 2021, when pandemic-era savings from staying at home and government stimulus funds helped Americans lower their debt loads. Consumer spending exploded in 2022 and 2023, as some splurged on post-COVID travel, and inflation made anything that consumers bought more expensive.
Late payments on credit cards also soared, as higher debt levels collided with sharply rising interest rates to strain borrowers. Credit card delinquency rates of at least 90 days jumped to 2.26% in 2022, up from 1.48% in 2021, according to the credit reporting firm TransUnion. The next year also saw a big increase, with the serious delinquency rate jumping by an additional 33 basis points.
The worst for consumer lenders may have passed, a new TransUnion forecast suggests. Serious delinquencies on credit cards are only expected to rise by five basis points this year and 12 basis points next year.
The TransUnion report also showed a deceleration in the total amount of credit card debt. After an 18.5% jump in 2022 and a 12.6% rise in 2023, card balances are set to grow by about 4% in both 2024 and 2025, the report showed.
Industry executives highlighted the resiliency of U.S. consumers at a conference this week.
"Consumer credit continues to be extremely strong," Wells Fargo CEO Charlie Scharf said at Goldman Sachs' annual financial services conference, explaining that delinquencies have returned to normal after being at "remarkable lows."
Consumers aren't "overextending" themselves on credit, said Brian Doubles, CEO of the card issuer Synchrony Financial, adding he was "still pretty bullish" on U.S. consumers.
"The consumer has been much more resilient, I think, than any of us thought a year ago," Doubles said at the Goldman Sachs conference. "They've hung in there."
People are "keeping pace with their payments," said Kate Prochaska, managing director of regulatory affairs at JPMorgan Chase, at a Consumer Federation of America conference on Wednesday.
Total household debt loads have risen and
The share of consumers' disposable personal income going toward debt was 11.5% in the middle of this year,
Still, some customers are saddled with balances that they're struggling to repay, said Dan Martinez, a former credit card executive who's now a program manager at the Consumer Financial Protection Bureau, during remarks Wednesday at a conference.
A CFPB
Bankers have also flagged a bifurcation among consumers, with those at the lower end of the credit spectrum facing more stress. The industry tends to stay away from lending to subprime consumers who are deemed higher-risk, instead focusing on borrowers with prime and super-prime scores.
At American Express, which focuses on super-prime customers, credit metrics remain benign, CEO Stephen Squeri said at the Goldman Sachs conference this week.
"Our customer is a customer that when they're challenged or when they get concerned, they still … pay their bills, which is why our credit numbers are so good," Squeri said. "What they do is they ramp down on their discretionary spending."
In recent weeks, Americans don't appear to have dialed back their discretionary spending. Holiday spending among U.S. Amex customers is up by double digits from last year, company executives said this week.
Broader retail sales data also shows little sign of a pullback, an indication that consumers remain confident that they're not overextending themselves. Total retail sales rose by 2.35% in November compared to the prior year, according to a tracker from CNBC and the National Retail Federation.
The moderate increase in sales came despite lower prices for TVs, furniture and other household goods, said Mark Matthews, the National Retail Federation's research head. The November increase would have been larger if Thanksgiving Sunday and Cyber Monday hadn't fallen in December.
Strong demand is helping keep the job market on track, said Deutsche Bank economist Brett Ryan, which ensures that credit card borrowers can maintain their paychecks and pay back their debt. While new hiring is by no means strong, employers are also laying off employees at subdued rates, he said.
"They may be cautious on hiring, but they're not downsizing their workforce," Ryan said. "That's really key, because it keeps income growth positive."
Vincent Caintic, an analyst at BTIG who covers consumer lending, pointed to some reasons for caution in spite of numerous positive signs. Credit card losses remain above 2019 levels, he wrote in a note to clients.
Meanwhile, subprime lenders and fintech companies "are taking share" from banks, thanks in part to the voracious appetite of private credit funds that are looking to buy loans and increase their exposure to consumer debt.
"We are concerned that the fintechs are satisfying this demand with looser underwriting standards," Caintic wrote.
Those investors "may prove fickle if consumer credit performance deteriorates further," Caintic wrote, limiting the funding sources of the lenders they support and potentially cutting off some consumers' access to credit.
