Card Borrowing Jumps 9.7% in July, Raising Profits and Risk Alarms

Credit card borrowing in the U.S. is surging at its fastest pace in months, sending a double-edged signal to banks and fintech lenders: a potential boost to earnings paired with mounting risk.

The Federal Reserve’s latest report shows revolving credit growing at an annual rate of 9.7% in July, the sharpest gain since April in a category that include credit cards. That surge outpaced economist projections and underscores households’ growing reliance on plastic to cover everyday expenses.

The $10.5 billion spike in revolving debt underscores the role card balances play as a predictor of whether families are confident enough to spend or stretched sufficiently to borrow to keep ahead. The analysts are already assessing the July statistics to determine whether they indicate consumer resilience or building financial stress.

With auto and student loan growth cooling, analysts say credit cards are increasingly serving as the clearest gauge of household liquidity — and financial strain. It also prompts questions about whether families are defaulting to the costliest form of credit because cheaper options are harder to secure.

For issuers, the increase sets up two diverging narratives. On one hand, higher balances drive profits. With APRs typically between 20% and 30%, credit cards remain the most lucrative consumer lending product.

For issuers, there is a silver lining in this rise of credit card borrowing: Higher balances can lead to stronger revenue potential.

A wave of balances carried month to month means more interest revenue and fees. The $10.5 billion jump alone could translate into hundreds of millions in new income across the sector.

At the same time, rising financial pressure is cutting both ways for lenders. Slowing wage growth, elevated borrowing costs, and stubborn inflation are tightening household budgets and reshaping credit demand.

Serious delinquency rates are creeping back to their highest since early 2020, raising the risk of future charge-offs. Issuers are balancing enthusiasm for loan growth with unease about the losses that may follow.

The makeup of borrowers is key. When affluent households take on more credit, risks stay contained. When financially stretched households do, it’s often a warning sign. Prime customers carrying balances remain profitable and relatively safe, while subprime accounts raise the chance of future charge-offs.

These moves are unfolding directly in response to the tension between profit and risk. Many issuers are expected to tighten standards for subprime borrowers while competing aggressively for prime customers with rewards programs and new product offers.

Others may follow consumer spending patterns — such as online retail, home goods, and auto-related purchases — to position installment plans, BNPL features, or category-focused rewards cards.

Meanwhile, risk management remains central: Banks are boosting loan-loss reserves to cushion against defaults, a step that could prove critical if delinquencies continue rising and consumer stress deepens over the coming quarters.