U.S. consumers are in debt — more than $18 trillion worth. According to the Federal Bank of New York, household debt increased in the 4th quarter of last year by $93 billion to reach a new record high.1https://www.newyorkfed.org/microeconomics/hhdc.html
Consumer debt is being fueled by the rising cost of living, i.e. food prices, health care expenses, energy bills, and housing costs.
In a paper called “The True Cost of Living” the International Monetary Fund also highlights the impact of higher interest rates with respect to loans, financing, and consumer borrowing:
“For consumers, the cost of money is part of the cost of living. Thus, as interest rates leapt to 20-year highs in the second half of 2023, consumers felt the financial squeeze. Home prices in the US are still up more than 50 percent since the start of the pandemic, and mortgage rates have roughly doubled. The interest payment on a new 30-year mortgage for the average house is up almost threefold since the end of 2019. The payment on a new car loan has nearly doubled. As a result, households’ interest payments grew by about 30 percent in 2023, the fastest rate on record.”2https://www.imf.org/en/Publications/fandd/issues/2024/12/the-true-cost-of-living-marijn-bolhuis
America’s Credit Card Problem
Consumer credit card debt is one of the key drivers of U.S. household debt, and it has now reached a record $1.21 trillion. In the 4th quarter of last year alone, credit card balances among U.S. consumers jumped by $45 billion. Americans are increasingly turning to credit cards to manage expenses, pay for items over time, and to buy things that they normally could never afford. Credit card delinquencies are now also rising to near 2008 levels.
According to the Financial Counseling Association of America, mismanaging and misusing credit cards — can quickly turn into a dangerous debt trap.
“Credit cards let people borrow money and pay it back later … People can choose to pay back the full amount each month or pay a minimum amount of the balance due … if you choose to pay just the minimum payment, only a small portion of your payment goes toward your debt. Most of your payment will go to paying interest. Since credit cards carry high interest rates, it can take a long time to pay off debt when only making the minimum payment. If you miss a credit card payment, then the bank can charge you interest on top of the original payment owed. If this happens repeatedly, the interest can grow significantly or snowball, meaning you will owe more and more each month. People refer to this as a debt trap.”3https://fcaa.org/2023/12/03/dangers-of-credit-card-debt
According to Paymnts.com, credit card debt drove about 48% of the 4th quarter increase in overall household debt. Consumer credit cards also have the highest share of 90+ delinquencies, growing 2% each quarter and 17% year-over-year — for overall delinquency rates that are now the highest in more than a decade.4https://www.pymnts.com/consumer-finance/2025/holiday-hangover-card-delinquencies-hit-multi-year-high
American Retirees are Struggling
There is also a new trend among America’s seniors, and it’s not Pickle Ball — it’s debt. According to newly released data from the American Association of Retired Persons (AARP), older Americans are increasingly using credit cards to cover their basic expenses. According to AARP data, 52% of adults ages 50 to 64 have credit card debt, along with 42% of those ages 65 to 74. The data suggests that rising everyday expenses are undermining the financial security of America’s seniors as they increasingly reach for credit cards to fund basic necessities.
AARP’s senior VP of research stated the following:
“What’s concerning there — is they have proximity and line of sight to a possible retirement. They’ll have to make tough choices – choices between paying down credit card debt or saving for retirement and ensuring their retirement security.”5https://www.foxbusiness.com/economy/older-american-amassing-credit-card-debt-cover-expenses-aarp-finds
New data from LendingTree paints an even more troubling picture as the online lender reports that a staggering 97% of retirement-age adults still hold significant non-mortgage debt with an average balance of $11,349.00.
“Credit card debt is the most common type among seniors, the analysis found, with 93% carrying a balance, followed by auto loans (37%), personal loans (19%) and, surprisingly, student loans (8%). The study draws from credit reports for seniors ages 66 to 71 in the 50 largest American cities. The report comes at a time when retirement researchers are concerned about rising debt among seniors, a trend that inflation and high interest rates may have accelerated.”6https://www.usatoday.com/story/money/2025/02/15/retirement-debt-how-to-get-out-finances/78541099007
Ironically, one of the reasons cited for the recent “unretiring” trend among baby boomers, particularly in their 60’s and 70’s, is financial necessity. Many older Americans are finding that their social security checks simply do not cover their basic expenses or enable them to fully enjoy their later years. As a result, seniors are reentering the workforce in unprecedented numbers and accumulating debt at a time when they should be enjoying financial freedom, travel, and self-discovery.
What Consumer Debt Means for the Economy
It’s no secret that consumer spending fuels America’s economic engine, and rising debt levels now threaten to decelerate, stall, and even bring the economy to a standstill. High debt burdens decrease demand for goods and services, slow economic growth, and create a punishing cycle of borrowing — leading to more debt — and rising delinquencies, defaults, and bankruptcies.
The Greater Phoenix Economic Council describes why debt is so dangerous for consumers as well as for the U.S. economy:
“Consumer debt measures all liabilities of consumers/individuals that require payments of interest or principal by consumers to the creditors at a fixed date in the future. It is calculated by summing up all liability categories, which include mortgage debt, home equity revolving credit, student loans, auto debt, credit card debt and other accounts payable. The rise in consumer debt levels when the economy slows and/or interest rates rise can lead to a hard pullback in consumer spending. As people pay more of their income to debt, they have less money to purchase other items. Because consumer spending accounts for 70% of U.S GDP, too much pullback can tip the economy into a recession.”7https://www.gpec.org/blog/understanding-how-consumer-debt-impacts-the-economy
U.S. consumers have always bailed out the American economy but as data suggests that they are now overstretched, maxed out, and overburdened by debt — the odds of a recession are increasing. With consumers now sidelined and increasing concerns about tariffs, inflation, and market volatility savvy investors are preparing for an economic downturn and many are holding gold as a safe haven.
Gold was recently listed as one of the “7 Best Investments During a Recession” by U.S. New & World Report: Gold has long been considered a hedge against stock market volatility and inflation.
“If a recession has caused excessive growth in the money supply and inflation is a chief concern, gold is often an attractive investment opportunity. There are several ways an investor can own gold. ‘For true safekeeping, bullion and coins are preferred’”8https://money.usnews.com/financial-advisors/articles/best-investments-during-a-recession
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1 https://www.newyorkfed.org/microeconomics/hhdc.html
2 https://www.imf.org/en/Publications/fandd/issues/2024/12/the-true-cost-of-living-marijn-bolhuis
3 https://fcaa.org/2023/12/03/dangers-of-credit-card-debt
4 https://www.pymnts.com/consumer-finance/2025/holiday-hangover-card-delinquencies-hit-multi-year-high
6 https://www.usatoday.com/story/money/2025/02/15/retirement-debt-how-to-get-out-finances/78541099007
7 https://www.gpec.org/blog/understanding-how-consumer-debt-impacts-the-economy
8 https://money.usnews.com/financial-advisors/articles/best-investments-during-a-recession
