Consumers are shifting their spending back to experiences and in-person activities this year. Which means that, as they return to restaurants, retailers and entertainment venues, pent-up demand and factors including inflation may make them more prone to overspending.
That’s according to a new TD Bank Consumer Spending Index survey released Friday, which polled more than 1,000 American credit card holders’ spending habits and preferences.
According to the survey, as communities eased restrictions over the past year, many people resumed spending on out-of-home activities. Dining out at restaurants landed among consumers’ top expense categories, and the survey also found an uptick in spending on entertainment, fast food and coffee compared to last year.
“With consumers eager to spend on the activities they enjoy, our survey found that 41% use a debit card as their primary method of making day-to-day purchases — despite more than 80% owning a rewards credit card. This signals a missed opportunity to earn valuable rewards that can help with future purchases,” said Paramita Pal, head of U.S. bankcard at TD Bank. “Selecting a card that offers cash back and being disciplined about paying it off can put money back in consumers’ pockets, which can be spent on a variety of purchases, from dining out to traveling or purchasing groceries.”
Looking ahead, more than a third of consumers (34%) say they are most looking forward to spending on travel in 2022, followed by home improvement (22%) and new technology (15%).
The shift to pre-pandemic habits may also be driving consumers’ inclination to overspend. The percentage of consumers who report overspending on dining out at restaurant and bars tripled compared to 2021 (30% vs. 10%). While consumers did not report overspending on entertainment purchases such as movies or concert tickets last year, 10% now say this is an area where they overindulge.
Shopping remains the primary reason people overspend, with over half (54%) admitting to this. While most people are still more likely to go overboard when shopping online, consumers who attribute overspending to shopping in-person more than doubled from 12% in 2021 to 29% in 2022, with many citing getting distracted by other items in the store and the ability to have items immediately instead of waiting for shipping as the primary motivators.
Consumers may also be inadvertently spending more on routine expenses due to inflation. Groceries, the top spending category in TD’s survey, experienced a price increase of 7.4% year-over-year in January, according to the Bureau of Labor Statistics.
In TD’s survey, consumers reported spending an average of $320 on groceries each month. At this spending rate, a consumer would earn about $77 per year if they exclusively grocery shopped with a card offering 2% cash back on purchases — enough to cover a weekly trip to the grocery store.
One way consumers are making purchases more manageable is by using Buy Now, Pay Later solutions. According to the survey, almost a third of consumers (31%) have used BNPL to finance a purchase, including 45% of millennials. Of those who have used BNPL, nearly half (47%) say they use it more now than they did a year ago and a majority (81%) anticipate they will use BNPL in the next 12 months.
ENGINE surveyed 1,007 Americans 18 years of age and older who had at least one credit card. The online survey was conducted Feb. 2-6.