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May 7, 2025

Consumers took on more debt in March to get ahead of tariffs. Consumer credit outstanding rose 2.4% at a seasonally adjusted annual rate, up from -0.2% in February. The three-month moving average gain in total credit outstanding came to $6.3 billion; that is less than half the 2010s average. On a year-over-year basis, consumer credit fell 0.8%.

Revolving debt, made up primarily of credit cards, grew by 1.7% at an annual rate. Retail sales were strong in March; consumers pulled forward purchases on items that will likely become more expensive due to tariffs.

Consumers took on less credit card debt in the first quarter of this year compared to last year; balance sheets are increasingly strained. by the Federal Reserve Bank of Philadelphia found that in late 2024, a record high share of card holders was making only the minimum credit card payment. Rapidly compounding debt at an interest rate of 21.4% risks future delinquencies and defaults.

Additional strain is on the horizon due to the end of the moratorium on student debt repayments. Earlier this week, the government started sending defaulted student loans to collections agencies. Up to nine million borrowers could be affected this year.

Nonrevolving debt, which includes car loans, student loans and personal loans, increased at an annual rate of 2.7% after falling by 0.1% in February. Auto sales surged in March as consumers sought to get ahead of tariffs. Demand for car loans will likely remain elevated for April. That could result in a slowdown in demand later this year.

The data on consumer credit are not adjusted for inflation. Real consumer credit outstanding edged higher by 0.3%, the first gain since October.