TD Bank survey: 4 out of 5 consumers’ spending habits were impacted by inflation

Man in white shirt and black tie holding an empty wallet.

Consumers have had their spending habits impacted by inflation, so much so that over half have been looking for relief through savings and rewards, according to a survey released Wednesday by TD Bank, which has its U.S. headquarters in Cherry Hill.

TD’s annual 2023 Consumer Spending Index revealed that 4 out of 5 consumers have had their spending habits impacted by inflation, with 57% turning to discounts and promotions and 53% seeking lower-priced options to combat inflation.

The CARAVAN survey was conducted from June 8-12 by Big Village among a sample of 1,005 U.S. adults ages 18+ to gauge shifts in consumer spending behaviors and credit usage.

“Consumers are undoubtedly continuing to feel the impact of inflation and rising interest rates,” Chris Fred, head of credit cards and unsecured lending at TD, said. “And it is not surprising that so many consumers are proactively doing their homework, speaking to financial professionals for pointed advice and seeking strategic ways to offset these rising costs, like identifying more available discounts or cost-effective alternatives.”

Where did consumers spend their bucks? With rising costs of living, respondents’ spending focused on necessities. Groceries were the leading expense for 51% of respondents, with another 13% spending primarily on gas. Meanwhile, only 5% of consumers are spending the most on discretionary expenses like vacations, electronics and high-end retail items. Thirty-nine percent of respondents have also cut their discretionary budget in response to rising costs of living, and 27% have had to dip into their savings to keep up.

“As costs rise, people need a little more flexibility,” Fred said. “We heard from consumers that they are looking for more breathing room.”

In response to this need for flexibility, TD Bank introduced TD FlexPay, which provides cardholders with increased flexibility by giving them the option to schedule a “Skip a Payment” once a year.

Cardholders can take advantage of the Skip a Payment option starting six months after account opening and will accrue interest during the month for which they skip a payment. In addition, they will automatically have their first late fee refunded every 12 billing cycles.

And, as interest rates continue to rise, consumers are looking for low- and no-interest solutions for their credit cards. The vast majority of respondents (89%) said they would be interested in a credit card with no interest, and 42% ranked low or no fees as the feature they most valued in their card benefits, with cash back coming in second at 34%. Nearly half (48%) of respondents selected no interest as the credit card feature they were most interested in, with customizable rewards coming in second at 25% and increased payment flexibility coming in third at 17%.

More than 40% of respondents (42%) also had experienced a situation in the past that negatively impacted their credit. Of this group, the leading cause for negative credit impact was incurring credit card debt (44%) — which ranked even higher than losing a job or source of income (32%) as a negative credit experience.

Consumers can find 0% interest through introductory offers with new cards or balance transfer options, but there is now also an option to replace interest charges altogether with a simple, monthly fee.

Rewards are a key factor for many when choosing a credit card, with more than 81% of respondents owning a rewards card and 31% of respondents applying for cards specifically because of its rewards features.

Of rewards cards, cash back cards are the most popular, with 63% of respondents saying they hold a cash back card. However, the survey found that consumers are not utilizing their rewards options to their full extent.

Most consumers (53%) use debit cards or cash as their primary spending method, meaning they miss out on optimizing spend-based rewards like cash back.

Even though two-thirds of consumers redeem their credit card rewards multiple times a year, 16% have admitted to letting their rewards expire. Of that 16%, more than 4 in 10 consumers said they let their rewards expire because they simply forgot to redeem their points.

“Our rewards don’t expire, so TD cardholders don’t have to worry about losing their value,” Fred said. For rewards-focused customers, Fred advised consumers look at their own spending and preferences to find the best fit. For instance, TD Double Up offers a flat 2% cash back on every purchase, which makes it ideal for consumers who spend across a wide range of categories and prefer effortless rewards. For customers who spend primarily on categories like groceries, entertainment, gas or dining out, a category-driven rewards card like TD Cash might make more sense. TD Cash allows cardholders to customize their categories for 3% and 2% cash back rewards on selected categories and 1% cash back on all other purchases.

The survey also found that respondents are leaning into digital banking and seeking easier and quicker ways to pay bills, spend money and access support. More than 8 of 10 respondents (82%) preferred to pay their bills online or through an app. Digital banking has become so important to consumers that more than half (55%) said they decide which card to get based on the digital experience provided.