At the dawn of 2025, the landscape of American consumers presents a stark dichotomy.
While lower-income families are tightening their budgets to prioritize essential expenditures, affluent individuals are indulging in luxuries such as fine dining and high-end travel. This contrast has emerged from recent first-quarter reports from various U.S. credit card companies.
As unease stemming from President Trump’s recent trade policies has spread across the nation, analysts and investors have expressed concerns about the potential for diminishing consumer confidence to affect the broader economy. Early indicators point to growing challenges for those already facing economic hardships.
For instance, data from Synchrony, a firm that specializes in providing store cards for major retailers such as Lowe’s and T.J. Maxx, reported a 4% decline in spending for the first quarter of the year.
This decline sharply contrasts with a 6% increase reported by American Express and a similar rise noted at JPMorgan Chase, both of which predominantly serve wealthier clientele with higher credit ratings. American Express customers reported spending 7% more on dining and an 11% increase in premium airfare compared to the previous year.
Synchrony CEO Brian Doubles remarked on April 22 that while the overall consumer base remains “in pretty good shape,” individuals are becoming more selective in their spending habits.
He noted that lower-income cardholders began reducing their spending approximately a year ago, curtailing discretionary and major purchases as inflation continues to erode their purchasing power.
Debt Concerns Grow
By the fourth quarter of 2024, an increasing number of Americans were slipping into debt, with 11.1% of credit card users making only the minimum monthly payments. This marks the highest figure observed in the past 12 years, according to recent reports from the Federal Reserve Bank of Philadelphia.
However, lenders targeting higher-income clients have largely remained insulated from worries about the economic impacts of tariffs, inflation, and the potential for a recession later this year, which could affect consumer spending patterns.
Brian Foran, an analyst from Truist, noted via email that the affluent segment has withstood economic pressures better, while those at the lower end of the income spectrum have significantly reduced their spending. This sentiment has been echoed across discussions with credit card companies and other financial analysts.
This divide can also be seen at Citigroup. Although spending within its retail card division declined by 5% this quarter, expenditures on the bank’s branded credit cards—typically held by higher-credit-score consumers—saw a 3% increase.
Both Citigroup and Bread Financial, another provider of retail and co-branded cards akin to Synchrony, reported a shift in consumer behavior, focusing more on essentials while pulling back from travel and entertainment due to concerns that tariffs may drive up the prices of certain goods.
While this behavioral shift is bolstering current spending, it could foreshadow weaker demand down the line.
According to Bread CFO Perry Beberman, consumers are increasingly purchasing items such as electronics, home furnishings, and auto parts. He noted that individuals are weighing their options regarding whether to invest in higher-ticket items, like large televisions, as they navigate the ongoing inflationary pressures. “That’s the real wildcard here,” Beberman emphasized.
