On paper, Alex Watts\u2019s household looks financially stable. He and his wife together earn a bit more than $140,000 a year; own their home near Columbus, Ohio; have great credit scores; and stay on top of their bills. When an unexpected expense hits, like a car repair or a hospital trip, they always find a way to cover it.<\/p>\n
But amid the ever-growing costs of groceries, gasoline and electricity, their monthly expenses are running into the red and their monthly credit card balances have gotten larger. To pay them down, they drive less to save money on gas and have stopped putting away money for savings.<\/p>\n
\u201cI\u2019m working between eight and 12 hours of overtime every week,\u201d said Mr. Watts, 36, a hospital nurse raising three young children. \u201cWe\u2019re cutting even, at best, but sometimes we\u2019re spending more than we\u2019re getting.\u201d<\/p>\n
The Wattses are among an increasing number of households leaning on credit to make ends meet as the costs of essentials \u2014 including housing, health care<\/a>, utilities and food \u2014 keep rising. Credit card balances reached a record $1.3 trillion at the end of last year, according to the Federal Reserve Bank of New York\u2019s latest quarterly study<\/a> of household debt, and more and more people are applying for new credit cards. Applications for credit rose in February to their highest level<\/a> since late 2022.<\/p>\n The strain from this increasing debt load is starting to show, with the percentage of after-tax income that households spend paying down debt ticking up since early 2025, according to Federal Reserve<\/a> data.<\/p>\n Banks say they are not seeing signs of serious distress. Jamie Dimon, chief executive of JPMorgan, said late last month that consumer borrowing habits looked \u201cfundamentally healthy.\u201d<\/p>\n But across all consumer debts, the share that is delinquent rose to 4.8 percent, the highest tally since 2017. For the first time in more than a decade, the national average credit score dipped last year, according to data from Experian<\/a>, one of the three major U.S. credit bureaus.<\/p>\n The data may also understate some of the strain, as more borrowers take on debts that rarely show up on their credit reports, like \u201cbuy now, pay later\u201d loans. Unlike most loans, these pay-later products usually do not involve a \u201chard inquiry\u201d<\/a> on the borrower\u2019s credit report \u2014 the kind that can lower credit scores \u2014 and lenders often don\u2019t report short-term loans to credit bureaus.<\/p>\n The Trump administration has noted the spike in consumer borrowing.<\/p>\n \u201cCredit card spending is through the roof,\u201d Kevin Hassett, a top White House economic adviser, said on Fox Business last Wednesday. \u201cThey\u2019re spending more on gasoline, but they\u2019re spending more on everything else, too.\u201d<\/p>\n Mr. Hassett attributed the spending surge to people having \u201cso much more money in their pockets.\u201d<\/p>\n But many consumers are not expressing optimism. The University of Michigan\u2019s latest U.S. consumer sentiment index reading, released Friday, dropped to a record low in May, even below the levels recorded during recessions.<\/p>\n For the Watts family, higher gasoline costs are one factor pushing up their spending. The cost of a gallon of gas near their home rose 70 cents overnight one day late last month. Their home energy bills have also soared: Mr. Watts\u2019s gas bill, which is normally under $100, was almost $400 in February.<\/p>\n That\u2019s compounding the stress that inflation has inflicted on his family\u2019s budget. His grocery bill is more than $1,000 a month higher than it was a few years ago, and the strawberries and other fruits his children love have jumped in price<\/a> in recent weeks.<\/p>\n \u201cThe secret sauce to keeping everything spinning is financial engineering,\u201d said Mike Pierce, the executive director of Protect Borrowers, an advocacy group. \u201cWhat happens when the music stops?\u201d<\/p>\n With credit increasingly serving as the glue holding daily life together, the consequences can be dire if that safety net disappears.<\/p>\n Davette Ceasar, 27, had relied on a Fidelity-branded card as her go-to card. Issued by Elan Financial Services, a division of U.S. Bank, the card carried a hefty credit line and a promotional zero-percent interest rate.<\/p>\n But last month, Ms. Ceasar discovered that her credit score had plunged almost 50 points because Elan slashed her credit limit by nearly $10,000, to just a tad more than her existing balance on the card. That spiked her credit-utilization rate, a major factor in credit scoring.<\/p>\n Ms. Ceasar called Elan and Fidelity seeking answers about the reduction. She was told that she had a late payment, which she thinks was a mistake \u2014 she is certain she made the payment online before her due date. Fidelity agreed to waive the late fee, but Ms. Ceasar has been unable, after weeks of calls to customer service, to get her former credit limit restored.<\/p>\n Ms. Ceasar, who lives in Maryland, had been looking for a new apartment to rent. Now, she worries her lower score will be an obstacle.<\/p>\n Medical debt pushed Opal Mattila, 42, a high school math teacher in rural Minnesota, over the financial edge. Ms. Mattila, who earns around $70,000 a year, pays $1,200 a month for a health insurance plan for herself and her 7-year-old son that carries a $3,500-per-person annual deductible. A cascade of health ills in recent years \u2014 essential dental work for herself and her son, followed by the costs of treating him for a broken arm \u2014 left her buried in bills for out-of-pocket costs she could not afford to pay down.<\/p>\n She filed for bankruptcy last year. In the bankruptcy process, the balances she had on her credit cards were discharged \u2014 and those accounts were closed.<\/p>\n \u201cIf something horrible were to happen, I don\u2019t know how I\u2019d pay for it,\u201d she said.<\/p>\n The tangle of affordability challenges created by health care and inflationary pressures is already having crossover effects.<\/p>\n Vicki Morris, 53, is a middle school speech therapist in a Chicago suburb. For more than 20 years, she has run a small business on the side, operating a clinic<\/a> that offers a range of therapeutic services for children. It has usually been profitable, giving her a bit of extra income to supplement her public-school salary.<\/p>\n