By Ray Birch
MIAMI—Is a recession on the horizon? Should credit unions prepare to support members through economic hardship? Maybe not just yet—new data indicate consumers’ purchasing power may be stronger than it appears.
New data on credit card debt is scheduled to be released by the Federal Reserve on Friday afternoon, and at WalletHub is projecting a $49-billion decrease on an inflation-adjusted basis.
"Consumers may have a bit more buying power heading into the summer than they would without such a healthy first quarter paydown,” said WalletHub Editor John Kiernan. “But we’ve seen over the years that shedding credit card debt during the first three months of the year does not mean we’re in for smooth sailing moving forward.”
What consumers do with the added spending power throughout the rest of the year is very important, explained Kiernan.
“If we quickly add the debt back and the charge-off rate continues to climb, the picture won’t be as positive,” he noted. “That said, the fact that people were still able to pay down nearly $49 billion in credit card debt in a quarter shows some financial resilience. It means we’re not completely tapped out—and that extra breathing room could support spending on things like travel or home improvement in the coming months. That’s a positive sign for the economy, for now, even if it’s not enough to rule out all recession worries."
Kiernan pointed out that the $49-billion decrease is around 1% smaller than the decrease in Q1 2024. Total credit card debt as of Q1 is projected to be roughly $1.29 trillion on an inflation-adjusted basis, or around 14% below the record high. And the average household credit card balance at the end of Q1 2025 is projected to be around $10,758 after adjusting for inflation. That’s $2,165 below the record high.
"It’s good to see that credit card debt is still well below the all-time high when you factor in inflation,” Kiernan said. “That shows people are trying to be more careful with their spending. Plus, consumers added much less credit card debt in the last quarter of 2024 compared to the same quarter in 2023, which shows some progress in managing debt.”
But there are still some warning signs, Kiernan said.
“Nearly half of Americans don’t have a plan to pay off their debt, and more people are falling behind on payments,” he said. “So, while things may look a little better on the surface, many households are still struggling, especially with high prices and interest rates."
Kiernan noted that although consumers usually reduce debt in the first quarter, they faced significant challenges this year that could have hindered those efforts.
"There were definitely concerns this year,” said Kiernan. “High prices, rising interest rates, and worries about tariffs made it harder for many households to catch up. So, even though people did manage to knock down about $49 billion in debt, that’s actually a slightly smaller drop than last year. It’s still a meaningful amount, and it gives families a bit of breathing room—but it also shows that budgets are tight, and it’s getting harder for people to bounce back after the holidays."
Kiernan reminded, too, thatthe charge-off rate rose sharply in Q4.
“Meaning more people are falling behind on payments,” he said. “That’s a reminder that some households are still stretched very thin, and it could limit how much buying power really materializes.”
WalletHub’s updated Credit Card Debt Study will be released on Friday around 4 p.m. ET, shortly after the Fed data comes out.