Inflation is Pushing Americans into debt

ArticlePersonal Finance & Career
Written by Abdullah Al-Bahrani
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Three takeaways

  1. Prices rose about 3.8% from November 2025 to October 2026, while average hourly pay grew 3.1% over the past year.
  2. Credit card debt hit a record $1.29 trillion, and delinquency is rising fastest in low-income zip codes.
  3. A rate hike expected in December and issuers trimming limits will make carrying a balance more expensive.

The Bureau of Labor Statistics released the October CPI data on Tuesday. Monthly inflation came in at 0.4% on a seasonally adjusted basis. Year-over-year inflation can't be calculated because October 2025 data isn't available due to the government shutdown. Using the November 2025 (325.1) to October 2026 (337.5) period instead, prices rose about 3.8%. That covers 11 months, not 12, so the full-year rate is likely a little higher. The last true year-over-year reading, for September, was 3.7%.

Inflation is climbing back toward 4%

Consumer prices, percent change from a year earlier

Line chart of annual CPI inflation from January 2019 to September 2026. Inflation peaked at 9.0% in June 2022, fell to 2.4% in January 2026, and rose back to 3.7% in September 2026, above the Federal Reserve's 2% target. 0%2%4%6%8%10% 20192020202120222023202420252026 Fed's 2%target 9.0% Jun 2022 3.7% Sep 2026
Breaks are October 2025, when the government shutdown stopped data collection, and October 2026, which has no year-earlier month to compare against. Source: U.S. Bureau of Labor Statistics, CPI for All Urban Consumers via FRED.
View the data
MonthAnnual inflation
Oct 2026No data
Sep 20263.7%
Aug 20263.4%
Jul 20263.3%
Jun 20263.5%
May 20264.2%
Apr 20263.8%
Mar 20263.3%
Feb 20262.4%
Jan 20262.4%
Dec 20252.7%
Nov 20252.7%
Oct 2025No data
Sep 20253.0%
Aug 20252.9%
Jul 20252.7%
Jun 20252.7%
May 20252.4%
Apr 20252.3%
Mar 20252.4%
Feb 20252.8%
Jan 20253.0%
Dec 20242.9%
Nov 20242.7%
Oct 20242.6%
Sep 20242.4%
Aug 20242.6%
Jul 20242.9%
Jun 20243.0%
May 20243.2%
Apr 20243.4%
Mar 20243.5%
Feb 20243.2%
Jan 20243.1%
Dec 20233.3%
Nov 20233.1%
Oct 20233.3%
Sep 20233.7%
Aug 20233.7%
Jul 20233.3%
Jun 20233.1%
May 20234.1%
Apr 20235.0%
Mar 20234.9%
Feb 20236.0%
Jan 20236.3%
Dec 20226.4%
Nov 20227.1%
Oct 20227.8%
Sep 20228.2%
Aug 20228.2%
Jul 20228.5%
Jun 20229.0%
May 20228.5%
Apr 20228.2%
Mar 20228.6%
Feb 20227.9%
Jan 20227.6%
Dec 20217.2%
Nov 20216.9%
Oct 20216.2%
Sep 20215.4%
Aug 20215.2%
Jul 20215.2%
Jun 20215.3%
May 20214.9%
Apr 20214.1%
Mar 20212.7%
Feb 20211.7%
Jan 20211.4%
Dec 20201.3%
Nov 20201.2%
Oct 20201.2%
Sep 20201.4%
Aug 20201.3%
Jul 20201.0%
Jun 20200.7%
May 20200.2%
Apr 20200.3%
Mar 20201.5%
Feb 20202.3%
Jan 20202.6%
Dec 20192.3%
Nov 20192.1%
Oct 20191.7%
Sep 20191.7%
Aug 20191.7%
Jul 20191.8%
Jun 20191.7%
May 20191.8%
Apr 20192.0%
Mar 20191.9%
Feb 20191.5%
Jan 20191.5%

Pressure on consumers builds up

3.8%price increase, Nov 2025 to Oct 2026
3.1%growth in average hourly pay, past year
$1.29Tcredit card debt, a record

The Federal Reserve Bank of New York's quarterly household debt report, also released Tuesday, finds that credit card debt has reached a record $1.29 trillion. Overall, credit card debt increased by 4.2% over the past year. The average credit card balance is $6,678, and that is up 2.4% from a year ago, according to a separate report from TransUnion.

As prices have increased while wages haven't kept up (average hourly earnings grew 3.1% over the past year, below the rate of inflation), American consumer spending continues, but more of it is financed through debt.

Credit delinquency

Credit card delinquency increased between 2022 and 2024, after declining during the pandemic when stimulus helped households stay current. The current delinquency rate is higher than pre-pandemic trends, with the largest increases in credit card delinquency in low-income zip codes. A new analysis from the New York Fed shows the gap between borrowers in higher-income and lower-income neighborhoods has widened since 2022. Part of that goes back to the pandemic, when lenders loosened standards and the share of new cards going to the lowest-income neighborhoods rose by nearly 2 percentage points. Those accounts are now showing the most stress.

There is one bright spot in this quarter's report. The share of card balances moving into serious delinquency (90 or more days late) dipped to 6.9%, from 7.1% a year earlier. That's still well above the 5.2% rate before the pandemic.

Credit cards are the most expensive way to borrow, and borrowing is likely to get more expensive in December. Markets expect the Federal Reserve to raise rates by 25 basis points (a quarter of a percentage point) at its December 8–9 meeting. Most credit cards carry variable rates, so a hike shows up on your card's interest rate within a billing cycle or two. The average rate on cards that charge interest was already 22.4% in August.

What to expect

Some credit card issuers are starting to cut limits and benefits, even for on-time payers. Beyond the direct impact of less credit availability and fewer benefits, this might also lead to a decrease in your credit score. As limits fall, your credit card utilization rate increases, sending the signal that you are a higher-risk borrower.

If you carry $2,000 on a card with a $10,000 limit, you're using 20% of your available credit. If the issuer cuts that limit to $5,000, you're at 40%, and you didn't spend another dollar.

What it means for you

If you carry a balance, pay down what you can before the December meeting. On the average balance of $6,678, a quarter-point hike adds about $17 a year in interest. At 22.4%, you're already paying close to $1,500 a year to carry that balance. The balance is the big cost, and the hike adds to it.

Check your credit limits this month, too. If one drops, call your issuer and ask for a review, and keep your balance well below the new limit so your utilization doesn't jump.

For the classroom and your conversations

  1. If your paycheck grew 3.1% and prices grew 3.8%, how would you keep spending the same? What are your options, and which one costs the most?
  2. Everyone faces the same inflation. Why would credit card delinquency rise faster in lower-income zip codes?
  3. A card issuer cuts your limit even though you've never missed a payment. Why would a bank do that, and is it fair?
  4. Should the Fed raise rates when households are already leaning on credit cards? Who gains and who pays?
Join the conversation

Has your card issuer cut your limit or your rewards this year?

Tell me in the comments

Instructor resources

For educators bringing this article into class.

References

CNBC. (2026, November 10). Credit card debt climbs to a record $1.29 trillion, New York Fed research finds. Read it

Federal Reserve Bank of New York. (2026). Quarterly report on household debt and credit: 2026:Q3. Center for Microeconomic Data. Read it

Lee, D., Mangrum, D., Scally, J. W., Sinha, T., & van der Klaauw, W. (2026, November 10). A look at the wider divide in credit card delinquency by income. Liberty Street Economics. Federal Reserve Bank of New York. Read it

U.S. Bureau of Labor Statistics. (2026). Consumer price index for all urban consumers: All items in U.S. city average [CPIAUCSL]. Retrieved from FRED, Federal Reserve Bank of St. Louis. Get the data

U.S. Bureau of Labor Statistics. (2026). Average hourly earnings of all employees, total private [CES0500000003]. Retrieved from FRED, Federal Reserve Bank of St. Louis. Get the data

Board of Governors of the Federal Reserve System. (2026). Commercial bank interest rate on credit card plans, accounts assessed interest [TERMCBCCINTNS]. Retrieved from FRED, Federal Reserve Bank of St. Louis. Get the data

Abdullah Al-Bahrani
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