Consumers Took on More Debt in March, Reversing Previous Paydowns

It looks like the paydowns on debt, for most U.S. households, were just a temporary lull.

Last month, PYMNTS reported that consumers had cut down at least a bit on their overall debt burden, paying down about $800 million. Spending on cards, long a mainstay in managing household purchases and impulse buys, decelerated.

But the latest data released by the Federal Reserve on Wednesday (May 7), indicates that borrowing is up again, as measured in March, and at a pace not seen in months.

The Fed reports its change in consumer credit in two buckets — revolving debt, a category that includes credit cards, and nonrevolving debt, which includes student loans and vehicle loans. In March, the reversal from the chipping away at debt was stark: Overall credit surged by $10.2 billion in March vs. February’s levels.

In March, consumer credit increased at an annual rate of 2.4%, which would be the highest annualized gain seen in half a year, and outpacing the roughly 1.5% pace seen through the first quarter. The quarterly rate marks a slowdown from the last two quarters of last year, at respective 2.5% and 2.4% annualized gains.

March’s uptick was driven by a 2.7% annualized increase in nonrevolving credit, the steepest rise since July 2024, while revolving lines grew 1.7% in annualized terms. Both types of credit saw decreased outstanding balances in February (0.2% for revolving and 0.1% for nonrevolving lines).

The credit gains bucked the overall dip in GDP for the quarter. As reported by PYMNTS, despite the overall negative performance of the economy, consumer spending on services continued to drive overall demand, led by increases in healthcare and housing and utilities.

On the other hand, durable goods saw a big decline in spending, particularly in big-ticket items like vehicles, which pulled the overall goods category down considerably (from 1.3% in Q4 to 0.11% in Q1). This suggests that while consumers are still spending on essentials and services, they may be pulling back on more discretionary or long-term purchases.

The positive (although modest) performance of credit in the first three months of 2025 can be taken with optimism as it paints a picture of a more wary sentiment among consumers (and firms) but without showing the behaviors consistent with a recession.

The read across thus far from earnings season, and beyond March, is fairly sanguine. During Visa’s most recent earnings call, and as reported by PYMNTS, CEO Ryan McInerney said, “Halfway through our fiscal year, consumer spending has been resilient and strong, but there is much uncertainty. Focusing on the U.S., in Q2 and through April 21, we have not seen any signs of overall consumer spending weakening. While spending growth differs among consumer spend bands, with the most affluent growing the fastest, all spend bands remain resilient and consistent with past quarters.”  

As for the puts and takes, as travel and lodging have seen some deceleration of growth, “but overall discretionary and nondiscretionary spend remains strong.”

Asked later in the call about consumer behavior, CFO Chris Suh said, “Here was some evidence of pull forward in certain categories. Electronics is one of them, and it was mostly in … the first part of April.”  We’d note too, that the growth in auto loans, as evidenced by the nonrevolving debt, indicates that consumers wanted to get vehicles ahead of the uncertainty sparked by tariffs, and the fact that vehicles would become pricier fairly quickly.

PYMNTS Intelligence data, in collaboration with Splitit, has found that credit has proven to be a key way to handle unplanned expenses and larger ticket purchases. We found that more than one-third of shoppers spent at least $250 on an emergency purchase, and in the last three months, the same share made an impulse purchase of that size. The most common purchases were auto parts, home maintenance and repair items, and appliances, with credit cards wielded by 35% of respondents.

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