U.S. Consumer Credit Woes & Managing Yours
According to the latest data from Lending Tree, U.S. consumer credit usage is expected to rise significantly through 2026. This trend may be attributed to increasingly accessible credit services, the current economy, and a surge in online shopping, which often offers easy credit options. Other significant data from 2025 includes:
- Credit usage is at its highest since the New York Fed began tracking it in 1999.
- Consumers’ total credit card balance is $1.233 trillion as of the third quarter of 2025.
- The national average card debt among cardholders with unpaid balances in Q3 2025 was $7,886.
Managing one's credit usage is crucial to maintaining financial independence. Here are some strategies to consider:
- Understand credit utilization - Keeping the percentage of total available credit used low is vital. A generally recommended ratio is below 30%.
- Make timely payments - Always pay bills on time. Late payments can negatively impact one's credit score.
- Maintain an active credit history - A long, healthy credit history can significantly improve one's credit score. It's essential not to close old credit cards with a zero balance, as they may help improve credit history.
Reducing credit usage is essential to help avoid being overwhelmed by debt. Here are some time-proven strategies:
- Prioritize high-interest debt - Pay off the debt with the highest interest rate first. This method, known as the 'avalanche' method, can potentially save you money over time.
- Follow a budget - Stick to a strict plan with a clear debt-repayment strategy. It can be a gradual process, but good planning can make it manageable.
- Establish an emergency fund - This fund provides cash to cover unexpected expenses by avoiding credit card use.
There are several paths to manage and reduce credit.
- Credit counseling agencies - These agencies can provide advice on debt management, help develop a budget, and offer free educational materials and workshops.
- Debt relief services - These services negotiate with creditors and may seek a "settlement" to resolve the debt.
- Financial professional - They can provide guidance on managing finances, including credit management strategies and debt reduction.
Let's Team Up
With understanding, planning, and professional guidance, it is possible to utilize credit effectively without becoming mired in debt.
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Following the recent U.S. and Israeli strikes on Iran, and Iran’s subsequent response launching attacks on its Persian Gulf neighbors, investors have been paying close attention to the conflict’s impact on energy markets. Iran borders the Strait of Hormuz, the most important passageway for global energy, carrying 20-25% of the world’s oil and liquid natural gas. The Strait has been effectively closed since fighting started, and despite the U.S. offering to provide ships safety and insurance guarantees, shipping companies may still believe it’s too risky for transit.
Should current conditions persist, the impact on oil prices could be profound. Available energy storage capacity in other oil-producing countries in the region is estimated to only last a few weeks, at which point new oil production would be cut back. Since the U.S. is a net exporter of oil, U.S. oil producers should gain as much from higher oil prices as consumers lose. Consequently, higher oil prices should have a greater impact on U.S. inflation than economic growth. However, the impact on consumers would not be felt evenly across the population. As shown in this week’s chart, consumer spending on energy commodities – gasoline, natural gas and fuel oil – accounts for a much larger share of pre-tax income for lower-income consumers than it does for higher-income consumers. This threatens to worsen inequality among low-income consumers, further contributing to the emerging “K-shaped” economy with potentially important political consequences.
For investors, the Iran conflict underscores the need for diversification and a recognition that real assets and income-producing investments can provide balance during these periods of heightened uncertainty.
Chart of the Week: Source: BLS, J.P. Morgan Asset Management.
Energy commodities include gasoline, natural gas and fuel oil.
Thought of the Week: Source: BLS, J.P. Morgan Asset Management
Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally
Adjusted Annual Rate
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital. Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index,
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R,
top to bottomare: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stockmarket, and
is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures
the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth values).
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