In the last year, credit card debt spiked to a record $1.14 trillion. But recent signs show consumers may now be pulling back.

Revolving debt, which mostly includes credit card balances, fell 1.2% in August, compared to a year earlier, according to the Federal Reserve’s G.19 consumer credit report released on Monday. Nonrevolving debt, such as auto loans and student loans, rose 3.3%.

After a prolonged period of high inflation and sky-high interest rates rates, spending habits are adjusting, according to Ted Rossman, Bankrate’s senior industry analyst. “Consumers have been in a pretty frugal mood lately,” he said.

Credit cards are also one of the most expensive ways to borrow money. The average credit card currently charges more than 20% — near an all-time high.

“The big fork in the road is whether or not you carry a balance,” Rossman said. Cardholders who pay their bill in full every month reap the benefits of cash back and travel rewards without paying interest. Cardholders carrying debt from month to month put themselves at risk of getting trapped in an expensive debt cycle, he said.

“Consumer spending is good for the economy, but it’s not good for your personal finances if you’re carrying credit card debt and paying a hefty interest rate,” Rossman said.

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This could be ‘just a blip’

However, it may be too soon to say whether August’s contraction reflects a real shift in consumer behavior, said Matt Schulz, LendingTree’s chief credit analyst. “It is far more likely that is just a blip.”

Even though spending has moderated this year, “it isn’t a huge decrease and I don’t think there’s really any reason to think that this is the beginning of a trend,” he added.

“it will be very interesting to see what the NY Fed debt data says when it is released next month,” Schulz said. “I expect it to show that debts are continuing to climb. I’d be very surprised if it didn’t.”

Heading into the peak holiday shopping season, lower rates and cooling inflation may encourage more spending in the months ahead, the National Retail Federation’s most recent analysis of retail sales also shows

“Easing inflation is providing added spending capacity to cost-weary shoppers, and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future,” Jack Kleinhenz, the NRF’s chief economist said in a statement.

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