A Target store is pictured in Des Moines, Iowa.
California – A growing number of Americans are tightening their budgets as rising prices and economic uncertainty put pressure on household finances. Consumer finance giant Synchrony Financial reports that spending is slowing across all income levels, reflecting a more cautious approach to shopping and borrowing.
“Purchase volumes have gone down across the industry as consumers across all income groups become more thoughtful about spending,” said Max Axler, Synchrony’s chief credit officer. While most borrowers are still keeping up with loan payments, many are preparing for a tighter financial future.
The shift comes as household debt continues to climb, with delinquencies creeping up on auto loans, credit cards, and home credit lines, according to the Federal Reserve. Consumer confidence has also taken a hit, plunging to its lowest level in nearly two and a half years in March.
Retailers are already seeing the effects. Companies like Target and Walmart have reported that shoppers are being more selective, waiting for deals, and switching to lower-cost alternatives. Analysts warn that reduced spending could be a warning sign of more significant financial struggles ahead. Slower spending could lead to more missed payments, defaults, and declining loan growth—a key revenue source for banks.
“There is clearly a slowdown, and it shows that the consumer is vulnerable,” said HSBC analyst Saul Martinez. Loan growth has already slowed industry-wide, declining between 5% and 12% in February compared to the previous year. If this trend continues, banks may face lower interest income and declining revenue.
Market concerns are already reflecting these fears. Shares of major consumer finance companies, including American Express, Capital One, Synchrony, and Discover, have dropped between 15% and 22% over the past month. The financial strain could worsen as federal student loan delinquencies start appearing on credit reports again for the first time in five years.
“For the first time in five years, federal student loan delinquencies will start to reappear on credit files, and we expect a lot of consumers to be stretched due to this,” said Rikard Bandebo, Chief Economist at VantageScore. “We expect delinquencies to go up as a result of it at a time when consumer debt is already high.”
Philadelphia Federal Reserve President Patrick Harker has warned that signs of stress in the consumer sector could point to broader economic trouble. If inflation expectations continue rising and consumers remain wary of spending, the slowdown could have lasting effects.
For now, Americans are adapting—cutting back on unnecessary purchases, prioritizing essentials, and keeping a closer eye on their financial health. But if economic pressures persist, today’s cautious spending could turn into tomorrow’s financial crisis.
