As consumers grapple with rising costs and high interest rates, recent studies have revealed an increased reliance on credit products to help make ends meet. Despite the seemingly rapid growth in balances, a new analysis by TransUnion (NYSE: TRU) uncovers a more complex reality.
According to TransUnion’s Q1 2025 Credit Industry Insights Report (CIIR) total consumer balances “have steadily increased over recent years.”
Total balances in nominal dollar terms (before adjusting for inflation) across all consumer credit products rose “from $14.1 trillion in Q1 2020 to $18.0 trillion in Q1 2025, approximately 28%.”
The cumulative Consumer Price Index increase “over that same time period, as measured by the U.S. Bureau of Labor Statistics, was nearly 24%.”
When adjusted for inflation, total balance growth “in real dollar terms is more modest, amounting to $0.5 trillion over the five-year period, an increase of closer to 3%.”
The analysis also revealed that inflation-adjusted balances “for consumers actually declined in real dollar terms across the majority of credit risk tiers from 2020 to 2025.”
This decrease was most “pronounced in the prime risk tier, which saw a 14% drop in balances after adjusting for inflation.”
In contrast, super prime consumers experienced “an 18% growth in balances over the same period.”
Much of the increase for super prime borrowers was “attributed to higher mortgage balances.”
The only other risk tier to see an inflation-adjusted “increase over the period was subprime at 1.9%.”
Their latest analysis reveals a picture of credit usage that “goes beyond simply an increase in total balances.”
When we account for the recent period of higher inflation, “the rise in balances suggests that consumers in most risk tiers are not over-extended.”
In fact, many consumers experienced significant “income gains since 2019, which have enabled most borrowers to effectively manage their debt levels.”
Michele Raneri, vice president and head of U.S. research and consulting at TransUnion said:
“These findings challenge the idea that consumers are simply accumulating credit card debt. Instead, they highlight how balances reflect the current economic reality. It’s understandable that only subprime consumers have experienced an inflation-adjusted increase in real credit card average balances, as this demographic has likely felt the impact of higher costs most acutely. But for other risk tiers of borrowers, their card balance growth has been less than the rate of inflation, indicating that many consumers may have further borrowing capacity.”
The first quarter of 2025 reflected credit card trends indicating “a return to equilibrium, similar to those observed towards the end of 2024.”
Notably, consumer-level delinquencies of “90+ days past due decreased for the second consecutive quarter, dropping by 12 basis points year-over-year (YoY) to 2.43%.”
This marks the first consecutive quarters “of YoY delinquency decline since 2020, during the height of the pandemic.”
In Q4 2024, total originations volume experienced “a slight YoY increase of 0.1%.”
Although modest, this represents the first “YoY growth in six quarters.”
Subprime originations saw a YoY growth of “2.9% in Q4 2024, the first in eight quarters, while super prime originations grew by 5.3% for the second consecutive quarter.”
Despite the uptick in originations, credit line amounts “on new cards continue to trend downward.”
The average credit line on new accounts decreased slightly by “0.3% YoY in Q4 2024, with growth in super prime lines offsetting smaller lines in prime and below.”
Paul Siegfried, senior vice president and credit card business leader at TransUnion said:
“We continue to observe signs that serious delinquencies may have peaked, with consumers managing their credit card usage more effectively. The year-over-year decline in 90+ days past due delinquencies, along with slower balance growth and stable utilization rates, indicates emerging market stability. We anticipate further declines in serious delinquencies in the coming quarters, primarily due to lenders’ intentional management of credit lines and cardholder risk profiles.”