U.S. household debt declines $13 billion in Q2

U.S. household debt fell by $13 billion in the second quarter, marking the first quarterly decline since 2021, according to data released by the Federal Reserve on Friday.

Total household debt decreased to $17.79 trillion from $17.81 trillion in the prior quarter. The decline was driven primarily by reductions in credit card balances and auto loans, which offset modest increases in mortgage and student loan debt.

Credit card balances dropped by $15 billion, while auto loan balances fell by $12 billion. Mortgage debt, the largest component of household debt, edged up by $2 billion, and student loan balances increased by $4 billion.

The Federal Reserve’s report, based on data from its Consumer Credit Panel, reflects borrowing trends among U.S. consumers. The decline in household debt follows a period of steady growth, with total debt rising by $1.5 trillion over the past two years amid rising interest rates and inflationary pressures.

Analysts noted that the reduction in credit card and auto loan balances may signal a shift in consumer behavior, as households prioritize debt repayment amid economic uncertainty. The data comes as the Federal Reserve continues to assess the impact of higher borrowing costs on economic activity.

The report also highlighted that delinquency rates for credit cards and auto loans remained elevated compared to pre-pandemic levels, though they showed signs of stabilizing.