Inflation is pushing credit card spending to new heights as consumers increasingly use cards to pay for daily expenses. PYMNTS’ latest study reveals that one-third of United States cardholders increased their credit card spending in the last six months, with the higher cost of living fueling this trend.
As consumers struggle to manage weakened spending power, credit card rewards and cash back programs emerged as leading factors influencing their decision to use one card instead of another.
These are some key findings in “Credit Card Use During Economic Turbulence,” a PYMNTS and Elan Financial Services collaboration. We surveyed 2,203 U.S. consumers between Feb. 27 and March 1 to examine the evolving role of credit cards in the face of inflation.
PYMNTS’ latest consumer research reveals that 55% of consumers with bank-issued credit cards pay their balances in full each month. At the same time, 45% frequently carry revolving balances. Income and the impact of inflation on the ability to pay bills strongly influence consumers’ tendency to carry balances. Consumers with lower incomes are likelier to feel the pinch from inflation and consistently revolve balances.
Amid elevated inflation, 33% of cardholders increased their reliance on credit cards in the last six months. Just 15% decreased their reliance. Younger generations and high-spending revolvers, those who pay 40% or more of their expenses via credit cards and usually or always carry a balance, led this uptick. How severely inflation impacts a cardholder directly affects their card reliance. Forty-three percent of those experiencing very or extremely negative effects significantly increase credit card spending during periods of high inflation.
Inflation is pushing consumers toward credit cards offering rewards and financial management features. Cardholders cite two main reasons for choosing one card instead of another. Thirty-one percent cite reward and cash-back programs and 13% cite immediate fraud detection alerts. Those who do not currently have credit cards are most attracted to cards that allow them to set flexible spending limits.
Credit cards play a central role in consumers’ everyday spending and issuers must pay attention to their needs. Download the report to learn more about how high inflation is evolving the role of credit cards in consumer financial health.