No, Americans are not funding their spending with debt.

There is a constant refrain out there that American consumers are running up big credit card tabs to fuel an unsustainable spending spree.

The only problem is it's dead wrong.

The balance of revolving credit not secured by real estate—primarily credit cards—has declined over the past several years when measured against disposable personal income. The credit to income ratio is now 5.7, compared with 6.1 in mid-2024.

Non-revolving credit for things like autos, recreational vehicles and student loans has declined more, falling from a ratio of about 19 in 2022 to roughly 16 today.

Why all the fuss then?

One reason is an unfounded preoccupation with nominal debt levels. One measure of the volume of credit card balances outstanding pushed above $1 trillion dollars at some point last year (but note that the measure used here had done so several years earlier). But this ignores the fact that debt burdens are smaller when income is higher.

The other (and justified) concerns focus on the effect of persistent high interest rates on financing costs and the relatively high rates of delinquencies. Credit card interest rates have barely budged from the highs reached in 2024, despite the reduction in short-term policy rates. The share of income going to personal interest payments of all types is the highest since the Global Financial Crisis. Credit card delinquencies are also high, although they have eased back a bit in recent quarters.

So no debt-fueled spending boom, but still evidence of financial stress for some families.