Total U.S. household debt slipped by $13 billion to $18.77 trillion in the second quarter, marking the first quarterly decline since 2020 even as credit card and auto loan balances continued to rise and delinquency trends remained mixed.
By yourNEWS Media Newsroom
American households reduced their overall debt burden during the second quarter for the first time in six years, driven largely by a drop in mortgage balances even as consumers continued adding credit card and auto loan debt.
Federal Reserve Bank of New York data released Aug. 11 showed total household debt declining by $13 billion from the first quarter to $18.77 trillion.
The quarterly decrease was unusual in a period when household borrowing has generally continued climbing.
“The last time that happened was exactly six years ago, early in the COVID-19 pandemic. Aside from that, the last quarter-over-quarter decline was way back in 2014,” Ted Rossman, principal consumer finance analyst at Money Management International, told The Epoch Times in a statement.
After adjusting for inflation, the decline was considerably larger. WalletHub analysis placed the inflation-adjusted reduction in household debt at $226 billion.
The average household owed more than $155,000 at the end of the quarter, approximately $17,000 below the record high.
Household debt has also been falling relative to the size of the U.S. economy since its post-pandemic increase and now stands at approximately 68% of economic output.
Mortgages accounted for the largest portion of the quarterly decline.
Outstanding mortgage balances fell $74 billion to $13.1 trillion, only the third quarterly decrease recorded since 2016. Tepid declines in home prices in recent years have helped restrain growth in mortgage borrowing.
Student loan balances decreased by another $7 billion to $1.65 trillion.
Millions of student loan borrowers have resumed making payments during the past year as part of efforts undertaken by the current administration.
Other major forms of household borrowing moved in the opposite direction.
Auto loan balances climbed $28 billion to $1.71 trillion, while outstanding credit card debt increased $21 billion to $1.26 trillion. Credit card balances nevertheless remained slightly below last year’s record of $1.28 trillion.
Balances on home equity lines of credit increased $13 billion to $459 billion.
Rossman said the borrowing figures fit with other indications that economic activity has been slowing.
“These statistics reflect a slowing economy, a trend also evident in other recent figures such as GDP growth (below 2 percent in two of the past three quarters) and the job market (net job creation turned negative in February and July),” Rossman said.
The picture was less straightforward when examining borrowers who have fallen behind on their obligations.
Overall delinquency rates were essentially unchanged at 4.7%.
The rate at which mortgage and auto loan balances moved into early delinquency increased, while transitions into delinquency remained stable for credit cards and other types of debt.
The flow into serious delinquency, defined as payments at least 90 days overdue, declined to 2.57% from 2.91% during the second quarter of 2025.
New York Fed researchers have pointed to an important distinction between the overall share of debt already delinquent and the pace at which additional borrowers are newly falling behind.
From the third quarter of 2022 through the first quarter of 2026, the share of credit card balances at least 90 days delinquent climbed from 7.6% to nearly 13%, “prompting concerns that Americans are falling behind on their debt payments at rates not seen since the Great Recession.”
The rate at which new delinquencies are emerging, however, has behaved differently.
“Yet the flow delinquency rate—which captures the rate of new delinquencies—has remained relatively stable for almost two years,” New York Fed economists said in an accompanying blog post.
Credit card exposure remains significant across U.S. households.
Approximately 175 million Americans hold credit cards, and 60% carry balances from one month to the next, leaving a substantial number of consumers exposed to high interest rates, repayment pressure and weaker economic conditions.
Separate research suggests those obligations are becoming increasingly difficult for some borrowers to eliminate quickly.
A survey by digital personal finance company Achieve found that 56% of consumers said paying off their short-term debts would require more than six months. Those obligations included credit cards, personal loans and buy now, pay later products.
Rossman attributed much of that financial strain to the accumulated increase in household expenses since the pandemic.
“The cumulative toll of persistently high inflation has been massive. Many households are facing housing, transportation, food and healthcare costs that have risen 30, 40 even 50 percent since the pandemic,” Rossman said.
“Income growth hasn’t kept pace for millions of Americans. Even if they’re working and even if they get a raise, they feel like they’re falling further behind.”
Overall consumer prices have risen cumulatively by approximately 30% since June 2020.
The next Consumer Price Index report is scheduled for Aug. 12. Expectations cited in the supplied material call for the 12-month inflation rate to slow to 3.4%, down sharply from a recent high of 4.2%.
Core inflation, which excludes food and energy, has been more subdued and is expected to ease further to 2.5%.
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