Revolving Credit Uptick Underscores Growing Demand for Card-Based Borrowing

The use of revolving credit is on the rise in the U.S., according to recent data from the Federal Reserve. Statistics from the Fed show that revolving credit grew at an annual rate of nearly 5% in October.

The Fed’s new consumer credit report is welcome news to credit card issuers as increases in outstanding balances can boost bottom lines through additional interest income.

In October, consumer revolving credit outpaced nonrevolving credit, which increased at a 1.2% annual rate, the Fed numbers reveal. The nonrevolving credit category includes secured and unsecured student loans and auto loans.

The difference between revolving and nonrevolving credit figures in October signal that households may have a growing appetite at this time for flexible financial products such as credit cards as opposed to long-term loans. 

One explanation for the increase in the use of revolving credit may simply be that cardholders have more purchasing power through their cards than they did in prior months.

Application rates for increases in credit card limits increased to a series high in the Federal Reserve Bank of New York’s recent Credit Access Survey. And another report reveals that automatic credit limit increases add more than $40 billion every quarter to the credit available in the U.S.

Data from PYMNTS  Intelligence shows that, when it comes to financial planning, 71% of cardholders say their credit limits play a significant role. 

“Banks are using increasingly sophisticated models to predict which customers will borrow more if their limit is raised,” Dr. Agnes Kovacs, Senior Lecturer in Economics at the business school of King’s College London, said in a report covering her research on credit limit increases.

“Automated credit-limit increases can expand access to credit and help households smooth consumption,” she added.

Credit card issuers will want to keep a close eye on cardholder balances as we move into 2026. 

The National Retail Federation forecasts that retail sales will increase between 3.7% and 4.2% this November and December as compared with spending during the same period last year. The group expects people to spend more than $1 trillion while shopping for the holidays this year. 

Experts predict holiday shoppers will increase their spending in November and December this year to top $1 trillion in total.

Issuers stand to gain more revenue as consumers use their credit cards to pay for their holiday shopping this year. But overall increases in revolving credit also serves as a warning sign that people may be spending more with their credit products now than they’ll be able to repay in the near future.

Some cardholders may struggle to pay down their balances in the new year, especially if they’re already carrying higher levels of card debt now.