Consumers Tap Credit for Summer Splurges

With summer travel and spending in full swing, consumer credit use is ticking upward. Average monthly credit card and store card balances have climbed roughly 7% per person since April. This rise indicates a mix of seasonal purchases and greater reliance on credit. Notably, we saw a 26% jump among reward seekers — cardholders who do not revolve balances month to month — which likely reflects summer splurges.

PYMNTS Intelligence’s latest research finds pockets of growth within a generally stable consumer credit market. For example, interest in less traditional lending products such as home equity and debt consolidation loans has risen considerably.

These are just some of the findings detailed in “Consumer Credit Economy Report: Consumer Credit Use Ticks Upward,” a PYMNTS Intelligence special report. This edition examines trends in consumer credit use. It draws on insights from a survey of 2,222 U.S. consumers conducted from July 8 to July 18.

• Stable, With Pockets of Growth
• Key Findings
• Read More
• Methodology

Stable, With Pockets of Growth

Amid uncertainty about the economy and job market, the consumer credit market remains stable with pockets of growth. Overall, the shares of consumers holding active accounts have remained broadly the same since April. This reflects a steady — if not stagnant — market.

That said, we see an interesting upward trend across nontraditional means. The shares of consumers with active home equity loans, payday loans and debt consolidation loans, among several other types, have all risen since April. While data can be noisy from month to month, this points to increasing demand for alternative forms. For some consumers, this likely reflects tighter financial positions and a resulting desire to look for more sources of credit.

Key Findings

Summer brings heightened interest in credit, specifically personal and auto loans.

Overall interest in new products has remained steady in the last four months. For example, while the share of consumers interested in obtaining a new card has fluctuated, it has mostly hovered around 7%.

That said, July brought modest increases in two popular categories: personal and auto loans. Interest in personal loans climbed from 11% in June to 14% in July, likely fueled by summer travel spending. Similarly, interest in auto loans climbed from 9.3% to 12% in the same period.

Interest in less conventional products has also mostly trended upward since April, echoing the previous section’s finding about higher uptake. For example, the share of consumers interested in obtaining credit builder loans rose from 8.5% in April to 11% in July. Interest in rent-to-own and payday loans rose by similar amounts. These data points again suggest that some consumers are exploring new types of credit in response to financial stress.

Consumers are using credit more frequently for typical purchases.

July saw a broad increase in the shares of consumers making a range of typical purchases with credit. For example, 60% of consumers bought groceries using a credit product, roughly 3 percentage points more than did so in May or June. Other common expenses, such as food from restaurants and digital streaming subscriptions, showed similar trends. Although these shifts are small, they show that demand is ticking upward.

Credit treadmill consumers have increased monthly balances.

Consumers have been gradually increasing their monthly card balances. Among respondents with at least one credit or store card, total average monthly balances have climbed from $2,550 in April to $2,721 in July, representing a 6.7% increase.

Breaking this down by credit persona reveals additional insights. Notably, credit treadmill consumers increased their average balances by $155 during this period. Consumers who revolve balances to make ends meet are gradually slipping into a more precarious position. Meanwhile, reward seekers, who do not revolve monthly balances, ramped up their monthly credit and store card spending by 25%. This likely reflects summer travel and activity splurges by this financially comfortable group.

Read More

PYMNTS Intelligence provides essential coverage of trends in consumer finance and credit use. Subscribe to our newsletters and read our in-depth reports.

• Higher Perception of Inflation Drives Paycheck-to-Paycheck Consumers to Trade Down
• New Data: Who Is the Bank’s Most Valuable Credit Card Consumer?
• New Study Shows Inflation’s Impact on How Families Spend in Stores and on Travel
• New Data: Got Credit? Consumers Do and They Want More

Methodology

“Consumer Credit Economy Report: Consumer Credit Use Ticks Upward,” a PYMNTS Intelligence exclusive report, is based on a survey of 2,222 U.S. consumers conducted from July 8 to July 18. The report examines overall consumer credit use trends. Our sample was census-balanced to match the U.S. population, with 51% of respondents identifying as female. The average respondent’s age was 48 and 38% earn more than $100,000 annually.