Americans Borrowed A Lot to Pay for Christmas 2025

The Debt Black Hole got a little bigger as U.S. consumer debt unexpectedly surged in December. Americans apparently put a Christmas spending spree on Visa and Mastercard.

Consumer debt climbed by $24 billion, a 5.7 percent increase, according to the latest data from the Federal Reserve.

Americans are now buried under $5.11 trillion in consumer debt.

The Federal Reserve consumer debt figures include credit card debt, student loans, and auto loans, but do not factor in mortgage debt. When you include mortgages, U.S. households are buried under a record $18.59 trillion in debt.

The big jump in consumer credit in December broke the trend of slowing borrowing we’ve seen over the last year, as Americans have run their credit cards close to the limit. The December growth in consumer debt was more than double the 2.4 percent average growth charted for the entirety of 2025.

Consumer borrowing cratered in the latter half of 2025, likely reflecting growing consumer stress, as price inflation persists and credit cards become maxed out.

KPMG recently reported that the slowing growth of revolving credit likely reflects a drop in borrowing and spending by the bottom 80 percent of U.S. households “that are increasingly stressed.”

“The top 20 percent now account for nearly two-thirds of all consumption. The top 3.3 percent have increased spending the most. Spending has stagnated, adjusting for inflation, among the bottom 80 percent.”

That's bad news for a U.S. economy that depends on consumers buying stuff. Persistent price inflation forced Americans to blow through their savings and then turn to credit cards to make ends meet. However, consumer borrowing has slowed significantly this year, indicating Americans may be maxing out the plastic.

The slowdown in borrowing also reveals why so many people are pushing for further interest rate cuts despite price inflation still well above the Fed's stated target. They want to pump up borrowing to stimulate the economy.

However, it appears consumers found a little room on the plastic to pay for Christmas.

Pundits lauded the big 1.26 percent month-on-month increase in retail sales in December, calling it a sign of “consumer health.” But it now looks like consumers had to borrow to fund the spending spree. Borrowing billions to pay for Christmas presents isn’t exactly healthy consumer behavior, especially when already up to their eyeballs in debt.

Non-revolving credit, primarily reflecting credit card balances, climbed by $13.8 billion. It was the biggest monthly gain in two years.

The double whammy of rising debt and interest rates exacerbates the debt problem. The average annual percentage rate (APR) currently stands at 19.61 percent, with some companies still charging rates as high as 28 percent. The average is only slightly down from the record high of 20.79 percent set in August 2024, despite Fed rate cuts.

High debt levels have created elevated levels of consumer stress.

LegalShield’s Consumer Stress Index (CSLI) increased by 3 points in the third quarter and was at the highest level since March 2020, when the economy was shut down during the pandemic.

The source of this stress: debt.

According to LegalShield, “The index has now increased for seven consecutive months, up 8.2 percent in 2025, signaling continued financial strain among American households. Legal inquiries related to bankruptcy rose sharply, while foreclosure and consumer finance issues remain elevated.”

Meanwhile, the New York Fed reported that overall delinquency rates remained “elevated” in the third quarter, with 4.5 percent of all debt in some stage of delinquency. Credit card and student loan delinquencies have increased at the fastest rate.

Overall debt flow into serious delinquency was 3.03 percent in the third quarter, up from 1.68 percent year-on-year.

Credit card delinquencies are rising, even among consumers with strong credit scores. According to VantageScore, there was a 47 percent year-on-year increase in late payments by people in the prime segment.

Non-revolving credit, primarily reflecting outstanding auto loans, student loans, and loans for other big-ticket durable goods, also picked up momentum in December, but failed to reach the pre-pandemic trend.

Non-revolving credit grew by 3.2 percent to $3.78 trillion.

Over the last several months, non-revolving credit has averaged a tepid 2 percent increase rate. Before the pandemic, revolving credit growth averaged 5 percent. It appears consumers are opting not to finance big-ticket items, as more and more of their income is necessary just to pay daily expenses.

The increase in non-revolving debt in December likely reflected an increase in college loan debt as students prepared for the winter/spring semester.

Borrowers are also struggling to keep up with their non-revolving loans – particularly their student debt. Seriously delinquent student loans surged to 10.2 percent in the second quarter as the government began requiring payments after years of forbearance in the wake of the pandemic.

Transitions of student loans into serious delinquency rose to 14.3 percent in the third quarter. That was up from 12.9 percent in the second, 8 percent in the first, and 0.8 percent in the fourth quarter of last year. It has been the fastest transition rate into serious delinquency since the data have been collected, going back to 2000.

The bottom line is that Americans have blown through the savings they accumulated during the pandemic and have run their credit cards close to the limit. The Christmas spending spree may have been a last gasp.

And even if consumers still have some borrowing power, an economy run on Visa and Mastercard simply isn't sustainable. When Americans finally hit their credit limit, it will have major implications for economic growth. 

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