Inflation is already impacting Americans’ buying behavior and credit card usage – Forbes Advisor

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You don’t have to follow the news to know that inflation is raging. Walking the aisles of grocery stores makes that point pretty quick, and filling your car’s gas tank costs more week after week. In fact, inflation in May 2022 was up 8.6% year over year, unadjusted for seasonality, according to the US Bureau of Labor Statistics.

A new survey for Forbes Advisor has asked Americans how inflation has affected their lives and how they expect it to change in the foreseeable future. The impacts are already significant, with 85% of respondents indicating that they have changed the types of purchases they make.

Here’s what Americans’ shopping behaviors look like today.

With rare exceptions, household budgets are stretched

At current spending levels, most households don’t have much wiggle room, according to this survey. A quarter of respondents said they have little room for maneuver in their current budgets – if inflation continues to rise, this room will shrink until it disappears altogether. As it stands, 27% of respondents’ budgets are already over budget and a further 26% are over budget.

Of the remaining survey respondents, less than 10% had “a lot” of free space in their budget, with the rest not tracking budgets or choosing not to disclose their financial situation.

To make ends meet, about 40% of respondents who have a credit card now rely more on it. As for the balance, 26% of respondents have recently started carrying it on their credit card, in addition to the 38% who already carry a balance. Despite this new dependence, 64% of respondents are somewhat or very worried that the rise in interest rates will have an impact on their debt.

Discretionary purchases are the first to go

Unsurprisingly, as prices rise and budgets tighten, non-essential purchases are generally affected. The main type of purchase that respondents reduce are discretionary items, including expenses related to entertainment or socializing. Two-thirds of respondents said they adjust their discretionary purchases to stay within their budget, such as reducing the number of items purchased or selecting cheaper options.

Pleasure travel is also on the chopping block. Respondents are choosing to travel less often and in some cases have canceled or postponed existing plans. Downgrading plans to more affordable options was another popular choice to deal with current prices. Only 9% of respondents said inflation had not affected their travel plans.

Additionally, more than half of respondents indicated that they put off making a major purchase. This number is even higher when we exclude respondents who have not planned major purchases: after adjustment, the proportion delaying major purchases rises to 70%. Deferring these expenditures may not be realistic indefinitely. Flexible schedules for household repairs or new vehicles can later become urgent needs and sources of financial pressure.

Essential shopping is also hitting

The cost of goods and services increased enough that respondents also changed their spending behavior for essential items. In fact, 30% of respondents haven’t necessarily changed the exact items they’re buying, but are paying more for them. Another 54% of respondents chose to stick to their budget, even if that means selecting different versions of essential items or buying a smaller quantity.

Although credit cards are far from the only solution to rising costs, some respondents would consider opening a new card to take some of the pressure off. Nor are the factors for choosing a new card glamorous. Access to additional credit was a consideration for 22% of respondents, while 17% of respondents would like an introductory APR offer to pay for purchases over time. Additionally, 17% of respondents indicated that they needed a welcome bonus to subsidize essential purchases.

Conclusion

Although no one can predict the future, high prices are already straining the budget of most households. This survey suggests that Americans have had to change their spending habits for discretionary and essential items and, in some cases, rely on credit cards and carry a balance to cover the costs of these already changed purchases.

Methodology

This online survey of 2,000 US adults was commissioned by Forbes Advisor and conducted by market research firm OnePoll in accordance with the Market Research Society’s Code of Conduct. The data was collected on June 2 and 3, 2022. This survey was overseen by the OnePoll research team, a member of the MRS and a member of the American Association for Public Opinion Research (AAPOR). For full survey methodology, including geographic and demographic sample sizes, contact [email protected]

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