The credit card divide mirrors broader economic concerns
This year, credit card lenders are seeing the emergence of two types of consumers.
Data from credit card companies in the first quarter reflects a clear divide in consumer behavior: low-income Americans are tightening their budgets, while wealthier individuals continue to spend on travel and dining.
Spending at Synchrony, which caters to lower-income shoppers at brands like Lowe’s and T.J. Maxx, dropped 4%. Major credit provider Citigroup also saw a 5% decrease in the number of cards it sold to retailers.
Citigroup and Bread Financial, another retail card issuer, noted a shift in consumer spending toward essentials, with reduced spending on travel and entertainment.
In contrast, lenders that serve more affluent customers saw spending increase. American Express and JPMorgan Chase reported a 6% rise in overall spending in Q1. Amex also recorded a 7% increase in dining expenditures and an 11% surge in first-class airfare purchases.
The credit card spending divide mirrors broader economic concerns. Wealthier households remain largely insulated from tariffs and recession worries, while others cut back and focus on essentials.
This divergence is showing up in debt, too. Credit card users opting for minimum payments hit 11.1% recently, a 12-year high per the Philadelphia Fed.