On paper, Alex Watts’ family looks financially stable. He and his wife together earn more than $140,000 a year; had their home near Columbus, Ohio; have good credit scores; and stay on top of their debts. When an unexpected expense comes up, like a car repair or a hospital trip, they always find a way to pay for it.
But between the ever-increasing costs of groceries, gas and electricity, their monthly expenses are getting redder and their monthly credit card balances are getting bigger. To pay, they drive less to save money on gas and stop putting down savings.
“I work 8 to 12 hours of overtime every week,” said Mr. Watts, 36, is a hospital nurse raising three children. “We cut even, the best, but sometimes we spend more money than we earn.”
The Wattses are among a growing number of households relying on debt to make ends meet as the cost of essentials – including housing, health care, utilities and food – continues to rise. Credit card balances reached a record $1.3 billion at the end of last year, according to the Federal Reserve Bank’s latest quarterly survey of household credit, and more and more people are applying for new credit cards. Credit applications rose in February to the highest level since late 2022.
The strain from this mounting debt is starting to show, with the percentage of after-tax income households spend paying off debt increasing as early as 2025, according to Federal Reserve data.
Banks say they see no signs of a major depression. Jamie Dimon, JPMorgan’s chief executive, said late last month that consumer lending trends looked “very healthy.”
But of all consumer credit, the delinquent share rose to 4.8 percent, the highest since 2017. For the first time in more than a decade, the national average credit score dipped last year, according to data from Experian, one of the three largest US credit bureaus.
The data can also narrow the spectrum, as many borrowers take on loans that don’t usually show up on their credit reports, such as “buy now, pay later” loans. Unlike most loans, these late-payment products typically don’t include a “hard inquiry” on a borrower’s credit report — the kind that can lower credit scores — and lenders typically don’t report short-term loans to credit bureaus.
The Trump administration has seen an increase in consumer lending.
“Credit card spending is through the roof,” said Kevin Hassett, the White House’s top economic adviser, on Fox Business last Wednesday. “They spend a lot of money on fuel, but they spend a lot of money on everything else.”
Mr. Hassett says the increase in spending is due to people “having so much money in their pockets.”
But many consumers are not optimistic. The latest consumer sentiment index reading from the University of Michigan in the US, released on Friday, fell to a record low in May, even below levels recorded during the recession.
For the Watts family, higher fuel costs are one of the factors driving 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 increased: Mr. Watts, normally under $100, were around $400 in February.
That adds to the pressure that inflation has caused on his family’s budget. Her grocery bill is more than $1,000 a month higher than it was a few years ago, and strawberries and other fruits that her children love have skyrocketed in price in recent weeks.
“The secret sauce to keeping everything going is financial engineering,” said Mike Pierce, executive director of Protect Borrowers, an advocacy group. “What happens when the music stops?”
As debt continues to act as the glue that holds everyday life together, the consequences can be dire if that safety net disappears.
Davette Ceasar, 27, relied on a Fidelity-branded card as her go-to card. Issued by Elan Financial Services, a division of US Bank, the card has a large credit line and a promotional 0 percent interest rate.
But last month, Mrs. Ceasar found that his credit score dropped by nearly 50 points because Elan lowered his credit limit by about $10,000, just over his current balance on the card. That increased his credit utilization rate, which is a big factor in getting a credit score.
Ms. Ceasar called Elan and Fidelity for answers about the downgrade. He was told he paid late, which he thought was a mistake – he’s sure he made the payment online before his due date. Fidelity agreed to waive the late fee, but Ms. Ceasar was unable, after weeks of calling customer service, to get his previous credit limit back.
Ms. Ceasar, who lives in Maryland, had been looking for a new place to rent. Now, he worries that his low scores will be a hindrance.
Medical debt has pushed Opal Mattila, 42, a high school math teacher in rural Minnesota, over the financial edge. Ms. Mattila, who earns about $70,000 a year, pays $1,200 a month for a health insurance plan for herself and her 7-year-old son that carries $3,500 each a year. A string of health problems in recent years — significant dental work for her and her son, followed by the cost of treating a broken arm — left her buried in bills for out-of-pocket expenses she couldn’t afford.
He filed for bankruptcy last year. In the bankruptcy process, the balances he had on his credit cards were written off – and those accounts were closed.
“If something bad happens, I don’t know how I will pay,” he said.
The flurry of affordability challenges created by health care and inflationary pressures is already having ripple effects.
Vicki Morris, 53, is a speech therapist at a middle school in suburban Chicago. For more than 20 years, she has run a small business on the side, running a clinic that offers a wide range of medical services for children. It has often been profitable, giving him a little extra money to supplement his public school salary.
But his clients are facing the same financial pressure as Ms. Morris felt at home. As health insurance costs rise and the Trump administration cuts funding for the Affordable Care Act, millions of people have lost their money, and even those with insurance are cutting back on medical care they can no longer afford.
A growing number of patients stopped coming for treatment and left him with unpaid balances, running into thousands of dollars. Keeping his business running and his employees paid now stretches his own money to the margins. He is turning to debt to get by.
“Car repairs will be done with credit cards. Home repairs are done with credit cards,” he said. “It’s the hamster wheel of the debt cycle. Every time you feel like you’ve hit a milestone, you’re hit with another one.”
