Lower-income earners are decreasing in their transactions to focus on essentials

Lower-income consumers are scaling back their spending to focus on necessities, while higher-income earners continue to spend freely on discretionary items like dining and luxury travel, according to first-quarter data from U.S. credit card issuers.

As uncertainty over President Donald Trump’s trade policies has unsettled markets in recent months, economists and investors have been watching for signs that declining consumer sentiment might translate into weaker economic activity. Early indicators suggest that stress is beginning to show, particularly among financially vulnerable groups.

At Synchrony, which issues store credit cards for major retailers like Lowe’s and T.J. Maxx, overall spending declined by 4% in the first quarter, the company reported last week.

In contrast, American Express and JPMorgan Chase—both of which serve more affluent customers with higher credit scores—reported a 6% increase in spending. AmEx noted that its cardholders spent 7% more on dining out and 11% more on first-class and business-class airfare compared to the same period last year.

While “the consumer is still in pretty good shape,” they’re becoming “more selective” about where they spend, Synchrony CEO Brian Doubles told analysts on April 22.

In particular, lower-income cardholders “started tapering their spend about a year ago,” Doubles said, citing inflation as a key factor behind reduced discretionary and large-scale purchases.

Signs of Strain

The strain is also visible in rising credit card debt. According to data released this month by the Federal Reserve Bank of Philadelphia, the share of cardholders making only minimum monthly payments rose to 11.1% in the fourth quarter—the highest level in over a decade.

So far, credit card companies serving wealthier clients have largely avoided the brunt of concerns over inflation, tariffs, and a potential recession later in the year.

“It’s fair to say that the high end has held up better, and the low end has pulled back more,” said Brian Foran, a banking analyst at Truist, in an email. “That’s been a consistent theme in conversations with credit card companies and across the consumer and retail sectors.”

This divergence was also evident at Citigroup. While spending fell 5% in its retail card division, usage rose 3% among customers using the bank’s own branded cards—who typically have stronger credit profiles.

Citigroup and Bread Financial, another issuer of private-label and co-branded cards, both noted that consumers are shifting spending away from travel and entertainment toward essentials, partly out of concern that tariffs could drive up prices.

Although this shift supports short-term spending, it could weigh on future demand.

“Consumers are buying more electronics, home furnishings, auto parts,” Bread CFO Perry Beberman said last week.

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