As banks shape their 2026 playbooks, consumer credit risk is front and center. Americans’ total credit card balance reached $1.233 trillion in the third quarter of 2025—the highest level since the Federal Reserve Bank of New York began tracking the data in 1999. Auto debt is also elevated at $1.66 trillion, and as of October 2025, a record 6.65% of subprime auto loans were 60 days or more past due.
Subramanian Narayanaswamy, a consumer lending risk specialist, says banks must closely monitor credit cards and auto loans because they “literally touch our everyday lives, and are highly sensitive to economic cycles.” Still, he does not see credit cards at systemic-risk levels. Card delinquencies have flattened over the past three quarters, home equity remains high, and household balance sheets are looking “pretty strong.”
Credit card growth is being driven by higher-income households—that could be a problem. Narayanaswamy notes that overall credit card spending is north of $6 trillion—roughly 20% of U.S. GDP and about one-third of Americans’ personal consumer expenditure—and that high-income consumers are responsible for about half of total credit card spending. For risk managers, a key question is what happens if top-income households pull back. If they ease up by just 5%, he says, aggregate card spending could cool noticeably. “There will also be pressure on banks’ net interest income if they pull back, as well as some second-order effects. For example, credit demand will come down,” he said.
Auto lending presents a different risk profile. Narayanaswamy describes a “perfect storm” of higher prices, longer loans, and rising APRs. Used car prices are up 45% since 2019, and roughly 60% of new originations come from used vehicles. About 30% of the used segment is driven by subprime loans, while the average APR for used vehicles has climbed from 8.5% in 2020 to 11.5% today. Many loans now stretch to 72 months, with 84-month terms increasing—and anything above 60 months is considered “high risk.”
Payment behavior matters. Today, credit cards sit in the middle of the payment hierarchy—behind mortgage and auto loans but ahead of student and personal loans. Understanding who pays what first is critical to assessing portfolio vulnerability.
Bottom line: Banks already have recession playbooks. Narayanaswamy says disciplined pricing, proactive credit line management, and a clear risk appetite statement—with defined loss thresholds for marginal cohorts—are essential. “So, when the economic downturn hits, they know what dial to play.”
