06/01/2023

Consumer research snapshot: Americans far from reaching the debt ceiling

Credit cards were the most popular point-of-sale payment method last year — 40% of consumers charged one at checkout — but other financing methods are gaining ground.

Elizabeth Christenson

Editor, Retail Leader

The Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit showed U.S. consumers’ credit card debt had not seen its usual post-holiday-season dip in the first quarter, while total consumer debt had for the first time surpassed $17 trillion. In turn, shoppers are showing signs of financial stress amid high inflation and rising interest rates.

While the share of current debt becoming delinquent has increased for the fifth consecutive quarter for most types of credit, delinquency rates are still low, historically speaking, with less than 3% of total consumer debt delinquent, i.e. at least 30 days late, Statista reports. The absence of a drop in credit card balances in the first quarter also could be a sign of robust consumer spending rather than financial stress, according to Statista. For example, credit cards are presently used more often as a payment method rather than a borrowing method.

Additionally, consumers are far from reaching their debt ceiling, at least in regard to their credit card limits. With a total credit card balance of $986 billion and a total limit of $4.5 trillion, U.S. consumers have $3.5 trillion in untapped available credit on their cards, Statista reports.

Americans far from maxed out on credit card debt

Last year, credit cards were the most popular point of sale payment method — 40% of consumers charged a credit card at checkout, according to Worldpay. Debit card (31%), e-wallet, digital/mobile wallet (12%) and cash (12%) followed as the most popular. Buy now, pay later (BNPL) financing trailed at around 1% consumer usage.

While all generations use credit cards, a TransUnion study found that 50% of “credit-active” Gen Zers in the U.S. have a credit card. In turn, the familiarity with financing payments opened the door for Gen Z to adopt newer forms of credit and debt, such as BNPL options. BNPL is expected to grow driven by younger consumers, and Retail Leader Pro recently reported 43% of Gen Z and millennials in the U.S. used BNPL services to shop for groceries.