Even members of the same family have a hard time deciding what movie to watch on a Friday night, what to name the new puppy or what color to paint the living room. Getting consensus across an organization to move a new project forward can become painstakingly arduous — that’s quite often why inertia reigns supreme.

There is one thing that nearly everyone agrees on. And that is the importance of protecting their financial interests.

Financial stability represents a fundamental human need. Whether wealthy with diversified investment portfolios or living paycheck to paycheck with financial pressures, individuals understand that safeguarding their money directly impacts their quality of life, future opportunities and sense of security. That’s as true for Gen Zs living their best-connected lives at home and at work as it is for Grandma collecting Social Security and dividends still trying to figure out how to Venmo birthday money to her grandkids.

Financial stability is also a complex calculation that goes beyond dollars and cents sitting in a bank or investment account. It’s about how wealthy people feel when they look at the value of their home, how well their investments are doing and how secure they feel in their jobs. It’s why preserving and growing one’s economic resources remains a common priority, and source of anxiety in uncertain times — regardless of how many zeros and decimal points one’s bank account balances may have.

That’s why financial decisions often come down to the quantitative and qualitative inputs that determine how wealthy any one individual, or household, may feel at any given point in time. Taking into account their income today, their wealth and their well-being in the years to come.

Based on brand-new, unpublished data from PYMNTS Intelligence, the financial confidence of Americans has been shaken severely. And their spending plans, present and future, are starting to show it.

The Not-So-Wealthy Effect

A new report to be released by PYMNTS Intelligence next week finds that the vast majority of consumers, whether they are living paycheck to paycheck or not, are pulling back their spending. They are doing that by buying fewer things or buying cheaper products.

This national study of 2,820 consumers (conducted March 12-31, before the world-shaking announcements of April 2) found Americans already making the connection between tariffs and the economic pain of persistent inflation and a possible recession, even before the full impact of these policies has hit home — and their wallets.

And they’re not waiting around to change their buying and spending patterns.

Nearly 78 percent of both groups across all major retail categories of spend — clothes, food, health and beauty, personal services, household and tech/digital services — are rethinking what they buy and how much they are willing to spend when they do. Tech purchases, eating out and buying coffee at the local coffee shop are consistently on the chopping block, even for those who do not feel financial pressures.

Those living paycheck to paycheck are concerned because higher prices crimp how far their paychecks can or will go. Those not living paycheck to paycheck are pulling back because they want to keep their powder dry, just in case.

Both groups were also probably feeling less wealthy than they did at the start of the year when the stock market took off and so did their 401(k)s. Even before the market meltdown of last week, the month of March 2025 saw the Dow down 4.2% and the S&P down 5.8%, with the market posting its worst month since March of 2022.

Yet even with this pullback, consumers weren’t cutting everything. Some spending is sacred. Kids’ activities top this list — parents will keep paying for soccer equipment, piano lessons and math tutoring even while cutting their own spending. Personal care services that most of us can’t DIY (or shouldn’t attempt) like haircuts and professional beauty services also seem resilient. These patterns show that when consumers tighten their belts, they’re making emotional choices, not just financial ones.

Keep in mind: these pullbacks were all before Liberation Day, which brought tariffs that were more extensive than widely predicted, and before the ensuing stock market crash.

After years studying consumer behavior (especially during COVID), we’ve found consumers are better economic forecasters than even some of the fanciest economic models. During the pandemic, consumer predictions of the durations of the crisis were better than the medical experts. Their spending patterns told the real story all along.

So, if consumers do what they say will do — and have already started to do — with their spending, the simple back-of-the-envelope math predicts a potentially gloomy outcome for the U.S. economy. That’s why many market and economic experts predict slowing economic and anemic GDP growth.

According to Census, U.S. retail spend was roughly $7.4 trillion over the last year, 80% of which can be attributed to consumers. The PYMNTS Intelligence data finds that 78% percent of consumers say they will cut back (buy less or buy cheaper), given the expected economic situation. Even a decrease of 2% in overall spending across that group would amount to a loss of $92 billion every year to the U.S. economy.

If prices increase by 10%, the PYMNTS Intelligence study finds that 18% of consumers say they will simply stop buying those items.

These data were collected before Liberation Day. And assumes that those consumers are still employed with wages that keep pace with inflation. There’s no guarantee of either because companies could cut jobs as demand for their products and services soften, and wages might not keep up with inflation as the job market softens.

The Business Uncertainty Multiplier

A consumer pullback is just one chapter of a very complex global economic story.

According to a forthcoming PYMNTS Intelligence March 2025 Certainty Project Study, 25% of middle market businesses report facing high levels of uncertainty, with a staggering cost equivalent to 6% of their annual revenues.

The ripple effects are tangible: 32% of these businesses say they have or will miss business opportunities due to that uncertainty, 33% faced delays in getting products to market, and 31% experienced client turnover because of their own uncertain business outlooks.

Let that sink in.

That’s roughly a third of U.S. businesses making between $100M to $1B in annual revenue — and the integral bridge between the enterprise and smaller business supply chains — who face some sort of economic uncertainty.

This same study also suggests that those supply chains — having just recovered from pandemic-era disruptions — are likely to face new chaos as businesses absorb the reality of tariffs actually taking effect on every import into the U.S. and higher tariffs on goods imported by 60 important trading partners.

Among middle-market businesses in the consumer and industrial goods industries, an overwhelming 89% expect shortages, delays and higher costs for materials. These businesses are doing the best they can to make lemonade out of tariff lemons, with 26% stockpiling inventory and negotiating with suppliers for better prices before the full effects take hold.

This is coming at the same time as these businesses face growing uncertainties about their own sales and margins, making them ill-positioned to absorb much of those higher costs as Administration officials hypothesize.

According to PYMNTS Intelligence research, the tariff policies that middle market businesses were expecting in March created a further crisis of confidence. Six in 10 expected higher uncertainty and planning challenges as a direct result, while 70% anticipated difficulty exporting due to retaliatory tariffs from trading partners. Overall, 38% of middle-market businesses expected negative impacts from tariffs — a figure that jumps to 53% among those in goods industries, up dramatically from 35% just a month earlier in February.

And this was all before the Trump Administration announced tariffs that were higher, covering more countries and possibly more permanent than were widely expected on Liberation Day.

What We Can Learn From Pinball Machines

Just north of Boston lies Laconia, New Hampshire. Laconia is famous for two things. It is right smack in the center of New Hampshire’s Lakes Region, with all four lakes touching some part of its city limits. And it is home to Funspot, the largest Arcade Center in the world, crowned the world’s largest arcade in the 2008 Guinness Book of World Records.

Funspot was established in 1952, and is home to more than 600 arcade games, many from the heyday of pinball machines and arcade games, its owners claim. The arcade industry, globally, is set to reach $21 billion by 2030, despite (and many say in spite of) the shift to video games. After all, who doesn’t love a game of good old-fashioned arcade pinball?

Pinball combines skill and chance. One powerful flip sends a metal ball careening across a field of flashing lights, blaring music and unexpected drops. Players work the flippers to keep the ball in play, building momentum and points until the game ends. No two games — or players — are alike.

Edward Lorenz was an American mathematician and meteorologist and considered the founder of modern chaos theory. His work at MIT was pathbreaking in furthering the world’s collective understanding of complex systems. Those insights have been applied to fields as diverse as weather, biology, computer science and economics.

In his 1993 book The Essence of Chaos, Lorenz uses pinball to illustrate complex systems. He notes that tiny differences in how players launch the ball create completely different outcomes. Though the physics of the game are deterministic, the results seem random due to the presence of these small sensitivities.

Both pinball and economics follow set rules yet defy precise prediction. In the example of tariffs, economists build models to analyze their impacts, but struggle with the same challenge that makes predicting a pinball’s path impossible: compounding and interdependent interactions that magnify even the smallest of initial variations.

A pinball bounces off bumpers and obstacles, each collision altering its path and influencing all future movements. Similarly, tariffs trigger responses throughout the economy — consumers change habits, companies shift supply chains, trading partners retaliate — creating feedback loops that standard economic models can’t capture or anticipate.

This is especially true in real time today, given the uncertainty of how the tariff game is going to play out. Tariffs could be gone by Easter or here through the century — or anything in between.

Navigating the New Economic Chaos

Today’s consumers, already nervous about spending, are the first bumper in our economic pinball machine. Their pullback creates the initial ricochet that determines how badly tariffs hurt the broader economy.

Our research consistently shows that consumers predict economic trends better than the experts. When they sense trouble — as they clearly do now with tariffs — their changes in behavior become self-fulfilling prophecies. Less spending leads to inventory pileups, less demand, then production slowdowns, then job cuts, then even less consumer spending … and down we go.

The lesson from pinball is clear: in complex systems, you can’t control every bounce once the ball is in play. Tariffs might seem straightforward, but the economic game that follows almost defies prediction. It involves the interaction between dozens of countries, millions of businesses and billions of consumers globally — and their guesses as to what everyone else is going to do.

Consumer spending drives nearly 70% of our economy, making it the most powerful bumper in this economic pinball game. When consumers collectively flinch — as our data shows they already are — the economic ball can careen in wild and dangerous directions.

The $92 billion consumer pullback we’ve calculated, based on the March expectations, is just the first bounce. But if the current tariff situation proceeds as outlined, the direct and indirect effects have the potential to impact every single person and every single business in the world.

And unlike arcade pinball, this economic game affects real families, real jobs and real communities. The stakes couldn’t be higher.

Yet even as economic headwinds gather, there are compelling reasons for optimism — or at least not descent into deep pessimism. Throughout our nation’s history, periods of economic challenge have consistently sparked innovation, adaptation and renewal. Let’s hope there is the collective will to course correct and play through the storm.

The post What Pinball Tells Us About Spending in the Post-Tariff World appeared first on PYMNTS.com.

Naturally, major unexpected expenses fall outside normal budgets, making it difficult for consumers to cover them. For impulse and emergency purchases alike, shoppers are more likely to pay with credit than cash. In fact, our latest research shows that access to credit heavily impacts a shopper’s ability to manage unplanned expenses and remain financially flexible, especially in the face of emergencies.

“Managing Unplanned Expenses: How The Pay Later Economy Fits Consumer Needs,” a PYMNTS Intelligence and Splitit collaboration, examines consumer spending trends for impulse and emergency purchases, focusing on the use of credit. It draws on insights from a survey of 7,078 consumers conducted from Jan. 29 to Feb. 7.

Inside “Managing Unplanned Expenses: How The Pay Later Economy Fits Consumer Needs”:

• The median cost of unplanned expenditures in key categories such as auto parts, appliances and more
• The shares of consumers who pay for impulse and emergency expenses with credit and cash
• What consumers prioritize in their choice of credit method
• The shares of consumers who use buy now, pay later (BNPL) and other alternatives to credit cards
• Which age groups are the biggest impulse spenders, and which have the most optimistic spending outlooks

Unplanned expenses happen all the time. Download “Managing Unplanned Expenses: How The Pay Later Economy Fits Consumer Needs” now to learn more about why access to credit shapes how shoppers make critical spending decisions when emergencies occur or when there’s an impulse deal that’s just too good to pass up.

The post Consumers Turn to Credit for Cash Management When Unplanned Expenses Hit, Study Finds appeared first on PYMNTS.com.

The plans are widely available, and our data notes that paying over time holds appeal for users across all income levels, even high earners, where a third of consumers making more than $100,000 annually had used BNPL. 

For the consumers with low credit scores or even no credit scores, the movement toward including BNPL loans in credit and underwriting decisioning — as BNPL performance is harnessed by the credit reporting agencies — is gaining momentum. 

The shift may have several positive effects effect: It can help those users build credit; expand the pool of borrowers for would-be lenders, and incentivize BNPL users to manage those obligations responsibly. The potential is significant, as PYMNTS estimated here that roughly a quarter of consumers are credit marginalized, having been rejected at least once when applying for traditional forms of credit, including credit cards.

Alternative Data and the Credit Bureaus

On Wednesday (March 19), BNPL provider Affirm said that beginning next month, it will feed information about all of its payment plans to Experian. The reporting will include its pay-over-time products, in addition to the monthly installments of longer-term loans that it already reports to Experian, including biweekly payment plans, Pay in 30 (single installment), Pay-in-2 and Pay-in-6 options. 

In February, FICO said it would seek to add BNPL data to its credit scoring analysis. Joint studies with Affirm, the analytics company said, found that for the 85% of consumers who had opened a new BNPL account, there was generally a consistent impact on their FICO scores. It also found that impacts on FICO Score predictiveness ranged “from modest improvement to no adverse impact, across a range of different use cases.”

The read across here is that the there can be incremental improvement in the credit-worthiness profiles of BNPL users when alternative data are included. The Kansas City Fed noted in a report that “refining the types of alternative data used in credit scoring and expanding consumer knowledge and comfort with alternative credit-building products may help improve adoption of alternative data and consumers’ access to credit and financial well-being going forward.”

The additional impact of having BNPL included in credit scoring may be that consumers will be averse to “stacking” short-term loans, with an eye on keeping their debt loads more manageable and boosting their credit scores at the same time.

We note that the reporting of the short-term loans is a work in progress, and in terms of impacting credit scores (once they are fully included), will be likely be phased in over time. In detailing bi-weekly reporting of BNPL, Equifax noted in past releases that new coding will “classify BNPL tradelines including payment history and give Equifax customers and scoring partners the ability to view and decide how to incorporate the information into their decisioning to potentially open up new mainstream financial services opportunities to more consumers.”

A positive BNPL payment profile can help smooth the path toward consumers being underwritten for credit cards and other types of loans that are paid down over time, including car loans.

As for credit performance, Klarna has maintained in its SEC filing to go public that its 30+ day delinquencies are “72% lower than the credit card industry average of 4.2% in the United States based on data from the Federal Reserve Bank of St. Louis,” which translates to a delinquency rate of 1.2%. Affirm’s own filings reveal that 30+ day delinquency rates at the end of last year were 2.5%, similar to where they were during the pandemic.

The post Reporting BNPL Performance to Bureaus May Broaden Pool of Credit-Worthy Consumers appeared first on PYMNTS.com.

PYMNTS Intelligence has found that 67% of the U.S. population lives paycheck to paycheck, so credit can be a vital lifeline towards meeting everyday expenses. Through the past three years, as inflation spiked to near double digits and FICO scores have remained lofty (averaging north of 700), there’s still a wide swath of the population — 60 million individuals, 15 million of whom are unbanked and 45 million are underbanked — that remains shut out from the traditional channels of financial services.

Credit Access is a Widespread Issue

“The credit access issue has not been solved,” Todd Schwartz, CEO of FinTech platform OppFi, told PYMNTS’ Karen Webster, adding that a vicious cycle exists in the quest to create credit worthiness. “If you’re not able to get a car or a home loan, how else do you build credit? It’s a real issue and it needs to be figured out.” 

For many of the individuals shut out from traditional credit, buy now, pay later plans have been a help, but the larger backdrop is that the aforementioned 60 million people have had missteps in their financial lives, have had to grapple with medical emergencies or other life changes, and the simple fact is that most of us have not been taught personal finance skills in school. 

“It’s hard to rebuild your credit,” he told Webster, “because to rebuild your credit you need more credit to prove yourself — so you’re already starting behind the eight ball … there are people who just don’t have credit because they have never applied for it or don’t use it. They rely more on debit cards and cash flow.”

OppFi, which seeks to expand credit access through a platform model that connects individuals with community bank partners and personal loans, is focused on the population that falls in the FICO range below the 650 mark, where traditional lending options thin out.

Borrowers must have regular sources of income and checking/savings accounts — and the company reports the loan repayment progress to the credit bureaus, which in turn helps OppFi’s customers build their credit profiles while getting the funds they need to meet the demands of emergency or unplanned expenses.

In another initiative, the company has partnered with financial app Zogo, which allows users to earn rewards and gift cards while improving their financial literacy.

“This is a way for us to give back and make sure that people understand the products that they are using,” Schwartz said.

Fine-Tuning the Model

Earlier this month, the company reported fourth-quarter results that detailed that net originations across its platform were up 11%, and net charge-offs had decreased markedly year over year. Guidance for current year revenues anticipate growth in the high-single digits to low-teens percentage points. 

He noted to Webster that there’s been “strong demand across our business” as the company has revamped its underwriting models — a nod to the fact that navigating through the inflation surge that began in 2022, a 4% spike in interest rates and ensuing defaults has led the firm to “look at the customer from a lifetime perspective as opposed to short-term repayments.”

That approach, he said, smooths out volatility, and OppFi’s automated approval levels are touching 80%. 

There are no prepayment penalties tied to the loans — and in fact, there’s what Schwartz termed a “returns policy,” where consumers can decide, if they want, to give the principal back with no attendant return fees.

“If someone pays to term, they’re paid in full,” Schwartz said of the loans, “so it’s all easy to use and understand.” 

The banking partnerships in place with OppFi, Schwartz said, also benefit from the platform’s two-sided approach, as underwriting at the bank account level based on cash flows improves credit risk assessment.

“There’s a lot of growth ahead this year for our company, and there’s a lot of growth ahead for our consumers — and if challenging times are ahead, we’ll be there for them,” Schwartz said. 

The post How OppFi Can Say Yes to Credit When Traditional Banks Say No appeared first on PYMNTS.com.

As had been reported last week, Block said that its Square Financial Services industrial bank has gotten the nod from the Federal Deposit Insurance Corp. to make consumers loans directly to borrowers, using Cash App Borrow. The announcement represents a shift, as the firm had previously made the loans through its external banking partner. By bringing the loan originating and servicing functions in house, Block retains the revenue streams associated with that lending.

“Cash App Borrow is designed to provide short-term cash flow in a simple and accessible way when alternatives are notoriously expensive and difficult for consumers to navigate,” the company said in a release, adding that under the external bank partnership model, the short term offering had seen $9 billion in originations last year. 

The announcement also represents a broadening of Square Financial Services’ reach, as the operation had been offering Square sellers business loans and savings accounts.  Savings balances tied to those activities had been $300 million at the end of last year.

Square noted that the same underwriting mechanisms that have been used for the business loans will now be used for the consumer-facing lending. The push into short-term lending comes as PYMNTS Intelligence has found that traditional avenues for credit access have been narrowing. By way of example, 29% of subprime consumers have applied for and been denied a credit card, compared to 12% of super-prime consumers.

In its 10-K filing, accessible here, the company details that its banking strategy seeks to “bank our base, move upmarket by serving families” and strives to “build the next generation social bank.” 

Cash App Card, the company has said, is the “entry point into a deeper banking relationship” with Block. Within the subscription and services based sales that that includes the Cash App offerings (and Cash App Borrow), Block’s $7.2 billion in revenues grew by 21% year over year, far outpacing the 5% seen with transaction-based revenues.

Loan Growth on Other Platforms

In other examples of the ways in which lending platforms are using the direct model to have some more skin in the game — as underwriting those loans with the advantage of the data flowing across those platforms — LendingClub disclosed in its latest annual filing that loans held by its LendingClub Bank totaled $5.1 billion at the end of last year, up 8% year over year. LendingClub Bank took shape upon LendingClub’s acquisition of Radius Bank, a pact struck in 2020.

SoFi Bank, which exists as a division of SoFi Technologies, said in its own 10-K that, in the wake of acquiring Golden Pacific,  and in addition to offering checking accounts, savings and credit cards through SoFi Bank, “we are originating all new loans within” that operation.

Holding more loans on its balance sheet allows the company to earn interest on those loans. The filings reveal that personal loans in the most recent quarter surged 26% year over year to $1.4 billion. 

And in a nod to the ecosystem effect, SoFi said the financial services revenue per product increased from $59 in the fourth quarter of 2023 to $81 in the fourth quarter of last year and its roster of 10 million individuals is up 34% year over year. 

Recent initiatives to expand the platform include the announcement last week that the company has finalized an agreement with Blue Owl Capital worth at least $5 billion. The deal with the asset manager will allow SoFi to expand its loan platform business, which refers prequalified borrowers to loan origination partners and originates loans on behalf of third parties. 

The post Block’s Direct Lending Move Aims at Filling Consumer Credit Gaps appeared first on PYMNTS.com.

SFS will begin servicing and originating Cash App Borrow loans nationwide in the coming weeks, replacing Block’s current external bank partner, Block said in a Thursday press release.

Cash App Borrow provides small, short-term consumer loans — typically less than $100 and about one month in duration — to Cash App customers in a simple and accessible way that includes making payments within Cash App, according to the release.

The short-term credit product saw nearly $9 billion in originations in 2024 offered by Block through its external bank partner. Most customers pay on time, and the product’s historic loss rates are under 3%, the release said.

SFS will continue to offer business loans through Square Loans and interest-bearing business savings accounts through Square Savings, per the release.

“Across Block we’re focused on building technology to increase access to the economy, and Square Financial Services is a critical tool in helping us deliver on that,” Amrita Ahuja, chief operating officer and chief financial officer of Block and executive chairwoman of the board of directors for SFS, said in the release. “The bank allows us to provide a clear path to cash flow using our proven underwriting mechanisms for businesses and now consumers who are not well served by the traditional banking and credit systems.”

Block executives said during a Feb. 20 earnings call that the company plans to continue doubling down on traditional banking territory in the year ahead, as it did for much of the past fiscal year.

For example, executives pointed to Cash App’s continuing evolution that has included the addition of an expanded suite of banking features including high-yield savings, paycheck allocation to investments and free tax filing. They noted that Cash App Borrow’s nearly $9 billion in originations demonstrates strong demand for micro-lending services.

In a shareholder letter, Block said: “Our goal is to make Cash App the top provider of banking services to households in the United States that earn up to $150,000 per year.”

The post Square Financial Services to Service and Originate Cash App Borrow Loans appeared first on PYMNTS.com.

In the report “Subprime Borrowers Flock to Alternative Options Due to High Credit Card Denial Rates,” we found that borrowers with FICO scores of 620 or less have higher denial rates than seen with other cohorts of borrowers.

The Vicious Cycle

There’s a vicious cycle here, where banks, the traditional lenders, have found that traditional risk-scoring metrics are less adept at determining where or when to extend credit. 

That, in turn, limits the credit cards or other types of loans available to those would-be borrowers. And then, of course, without those loans or credit products in hand, with a paydown history attached to them, it becomes harder for those subprime consumers to boost their credit scores, which then improves credit access.

Twenty-nine percent of subprime consumers have applied for and been denied a credit card, compared to 12% of super-prime consumers.

And yet, PYMNTS Intelligence has found that subprime consumers are willing – and have been trying – to find new ways to improve their credit. The attack is two-pronged, where these same consumers are using the credit they do have to manage how they pay for essential goods and services, and satisfy those obligations.

Who Has Access — and Who Doesn’t

Of the more than 2,300 consumers that we surveyed earlier in the year, the data shows that 57% percent of subprime borrowers have access to credit cards, and 21% use them to make essential purchases to improve their credit score. 

That leaves a gap, given the fact that 43% of this segment does not have access to the traditional lines of credit. But one-quarter of consumers with low credit scores use credit for nonessential expenses with the specific intent of raising their credit score. As for the action of adding purchases to the cards, and paying them down, we found that subprime borrowers are 30% more likely than consumers with high credit scores to use credit on nonessential items specifically to raise their credit score.

There’s evidence that enlarging the pool of debt types that are used to calculate credit scores (and for providers and issuers, expanding their actual range of loan offerings) may have a beneficial effect. 

In one example, we found that subprime are more likely to have applied for loans and buy now, pay later (BNPL). For instance, 40% of subprime borrowers have applied for BNPL, compared to 27% of super-prime consumers. Moreover, subprime consumers are 2.1 times more likely to have applied for a payday or credit-builder loan than those with higher credit scores.

For the issuer and the lenders, the long-term benefits should be apparent in the fact that subprime borrowers are 3.6 times more likely to show interest in getting a new credit card than those with the highest credit scores. While 12% of subprime consumers report interest in obtaining a new credit card, just 3.2% of super-prime borrowers say the same. 

The lower echelons of credit-rated consumers also state that they are interested in personal loans and auto loans, which would further deepen their relationships with banks. FIs would be well-advised to develop strategies for serving the subprime market responsibly with secured credit cards and other credit-building instruments that appeal to subprime individuals.

The post Subprime Borrowers Seek Strategies to Improve Their Credit Scores appeared first on PYMNTS.com.

For millions of Americans, this isn’t a hypothetical — it’s their reality.

Today, some 67% of Americans say they live paycheck to paycheck, according to a recent PYMNTS Intelligence study. The paycheck-to-paycheck lifestyle spans income brackets, education levels and professions. The every-other-week rhythm of waiting for the next paycheck has become America’s most common financial heartbeat.

Read More: Paycheck-to-​Paycheck Ranks Swell as Rising Prices Erode Savings

Living paycheck to paycheck means consumers need their next paycheck to meet their monthly obligations. How much of a cash cushion they have is hugely important in determining how far consumers are willing to push their paychecks every month — and how stressed out they might be if faced with an unexpected financial shock.

A possibility that could become more of a certainty as the latest news out of Washington is that President Trump declines to rule out the possibility of a recession in 2025 — and lots of analysts agree.

Not Your Typical Paycheck-to-Paycheck Consumer

For me, the paycheck-to-paycheck conversation was turned on its head about nine years ago.

In May 2016, I came across a cover story in The Atlantic titled “The Secret Shame of Middle Class Americans.” The author, Neil Gaber, described his personal story of living paycheck to paycheck, despite a career as a successful writer, and — in his words — being “reasonably prosperous.”

Although he was “nowhere near rich,” he earned a “middle to upper-middle income” salary, lived in Manhattan and sent his two daughters to private school. Yet, he describes being unable to cobble together enough money to cover a $400 emergency expense without having to ask friends or family members, including his own grown daughters sometimes, to pitch in.

His 6156-word story wasn’t intended to garner sympathy. It was intended to shed light on the paycheck-to-paycheck treadmill that he and his family — and, he contended, many middle-income Americans — were on.

Gaber described the emotional toll that his “financial impotence” took as he tried hard to shield the family from the many financial bumps in the road.  He admits that most of his financial issues were related to the lumpy nature of how he was paid: lump sum book advances that created tax issues and the need for disciplined financial management over several years as he completed his novels.

Then there were unexpected ups and downs of life that delivered painful financial gotchas.

Selling his co-op in Manhattan to reduce his monthly housing costs took two years, during which time he paid double housing costs; book deals took longer to finalize and writing gigs got axed. Saving money was a challenge. Credit cards helped stretch his income but came with revolving debt at high interest rates that only compounded the problem.

But mostly, Gaber said, his paycheck-to-paycheck lifestyle was his choice.

His choice to be a writer, and specifically a novelist, with the unpredictable income swings and caps inherent in that profession. His choice to live in New York rather than a cheaper place. His choice to pay for private school and college for his girls, their weddings and childcare as they grew up.

Gaber said that his paycheck-to-paycheck lifestyle wasn’t the result of living “an extravagant lifestyle” but something more fundamental: too little income, too many expenses in the choices he and his wife made. And those choices had consequences over time, including an inability to save as much as he needed or wanted to.

His story stuck with me, mostly because it was antithetical to the stereotypical paycheck-to-paycheck persona: poor, uneducated, unemployed, with few future prospects.

And Gaber’s claim that more middle-class Americans fit that definition than were willing to admit it.

Unpacking the Paycheck Economy

In March of 2020, the PYMNTS Intelligence team began to benchmark the paycheck-to-paycheck status of Americans as part of our monthly consumer studies related to COVID, the digital shift and how people spent and saved their money.

It seemed  like a good time to gather and benchmark intelligence about how consumers would spend and save their income.

The U.S. was entering a once-in-a-hundred-year global pandemic, a period of instability and uncertainty. Documenting all the puts and takes would offer important insights for businesses, startups and investors. To our knowledge, this effort is the largest dataset documenting the shift to digital and the related spending and payments behaviors over that period — and those studies continue to this day.

To capture the paycheck-to-paycheck sentiment, we asked U.S. consumers to self-report their financial lifestyle against whether they need their next paycheck to meet their monthly financial obligations. And if they say they do, whether they can do that comfortably or whether they will struggle to make all payments on time.

Our results over this five-year period are remarkably consistent with the personal story Gaber recounted in May 2016.

They suggest that the American consumer’s relationship with money goes well beyond simple income calculations. It speaks to their values, priorities and the complex balancing act between choice and necessity that shapes those personal financial decisions.

Who is the Paycheck-to-Paycheck Consumer?

Like Gaber’s account in 2016, the American consumer’s paycheck-to-paycheck status is shaped by financial obligations and lifecycle, not just income. It is often based on the choices people make about how they align their expenses to their paychecks.

It’s not about being “poor.” And alternatively, not living paycheck to paycheck isn’t about being “rich” — even though most people prefer to define it in those stark terms.

It isn’t even about whether consumers save or don’t. In fact, 4% of people living paycheck to paycheck and who report having issues paying their monthly bills and 5% of those say they live paycheck to paycheck without issues say that savings and investments are part of how they allocate their monthly income.

Instead, we find that paycheck-to-paycheck living spans all income levels, including half of high earners (defined as those earning $100,000 or more each year) as of January 2025. Across all income groups, people report similar abilities to pay their monthly bills without a struggle but needing the next paycheck to stay on track. This implies that living paycheck to paycheck isn’t solely about financial hardship or an inability to meet basic needs, but how people choose to manage their monthly income.

Here’s an example.

In November 2024, high-income individuals (those earning $100,000+ annually) constituted a larger portion of struggling paycheck-to-paycheck consumers than middle-income earners. At the same time, from January to April 2023, nearly 25% of lower-income individuals reported not living paycheck to paycheck, a figure that declined to just 16% by January 2025.

Conversely, the proportion of higher-income people not living paycheck to paycheck increased slightly, though with significant fluctuations throughout this period. This disparity between lower-, middle- and higher-income groups indicates either similar cost pressures across income levels or potentially different spending choices among higher earners.

That suggests that paycheck-to-paycheck living is a continuum between choice and necessity. This choice-necessity framework provides a unique lens for understanding the dynamic nature of paycheck-to-paycheck behaviors.

Our research reveals that 21% of American consumers (37 million) live paycheck to paycheck primarily out of necessity — there is a significant mismatch between money in and money out every month. More than half — 54%,or some 93 million consumers — do so due to a blend of choices about how they spend their paychecks and circumstances that create unexpected financial events. And 25% live this way predominantly by choice.

Higher earners cite family support obligations (such as kids at home and their attendant expenses), debt payments and higher spending on discretionary items — food out, vacations, clothes — for living paycheck to paycheck by choice. Lower-income earners point to wages that are insufficient to cover the rising costs of basics like housing and food for living paycheck to paycheck out of necessity.

A quarter of middle-income paycheck-to-paycheck consumers live this way by choice, unforced by necessity. Like their higher-income counterparts, their decisions, by default, become necessities as they have defined them. Sending their kids to private school, like Gaber did, was a choice, but one that he and his wife considered a necessity.

By contrast, over half of lower-income paycheck-to-paycheck consumers report necessity as their primary driver, because so much of their paycheck is allocated to paying for basic essentials.

Notably, the proportion of low-income consumers living paycheck to paycheck by choice has increased 5% since 2023, while necessity-driven cases rose 3%, indicating a growing polarization in how lower income consumers now manage their income to expense ratio every month.

Although these lower-income individuals are more likely to be living paycheck to paycheck by necessity, almost 1 in 4 are living this way by choice. The choice-driven group tends to be younger (Gen Z or millennials), and they are more likely to have children.

Whether consumers are driven by choice or necessity varies by income and generation, and by how much money they have in the bank.

People who live paycheck to paycheck by choice have about $1,400 more in savings than those living paycheck by necessity. And, although inadequate savings correlate with financial hardship for some, others maintain substantial savings, yet still spend most of their income each pay period.

Choice versus necessity determines how consumers spend their paychecks every month. Regardless of how consumers define their paycheck-to-paycheck status, everyone allocates some of their income to the basics — housing and groceries. However (and not surprisingly), consumers whose paycheck-to-paycheck lifestyle is shaped more by more choice than necessity allocate more of their income to discretionary expenses.

More than two-thirds of those consumers chose to spend money on social activities at least once a month in the past year, compared to 43% of those who live paycheck to paycheck out of necessity. Consumers who live paycheck to paycheck out of necessity are half as likely to be planning to spend on leisure, entertainment and recreational activities because they lack the cash to spend on discretionary items.

How paycheck-to-paycheck consumers use credit cards varies. We know that 90.5% of American consumers who want credit cards have and use them. According to the latest Federal Reserve data, American consumers have more than $1.4 trillion in credit card outstandings. Consumers have always used credit to leverage their spending power, and consumers across all paycheck-to-paycheck personas use it for that reason.

Consumers living paycheck to paycheck either by choice or necessity have higher credit card balances than those who say they don’t — and obviously for different reasons. Those who say they struggle with meeting their monthly financial obligations are much more likely to revolve their balances, using credit to fill in the gaps between paychecks or to ride the storm when unexpected expenses arise.

A third more consumers who report struggling to meet their monthly obligations say they always revolve their credit card balances than those who say they comfortably pay their bills each month. The share of struggling paycheck-to-paycheck consumers who usually or always revolve their credit card balances has risen 7.4 percentage points since 2023.

Savings tips the balance of the paycheck-to-paycheck lifestyle. Having cash savings significantly changes how people view their financial situation and how they save or spend accordingly. Living paycheck to paycheck — or not — is also influenced by how confident people are about the adequacy of their cash cushions if something goes haywire.

During COVID-19, fewer American consumers reported living paycheck to paycheck despite higher unemployment. This unexpected trend occurred because stimulus checks and enhanced unemployment benefits provided many households with unprecedented cash reserves. Between 2021-2023, the percentage of Americans reporting paycheck-to-paycheck living dropped to 54.5% as debts decreased and savings grew.

Having savings doesn’t automatically change whether people still think of themselves as living paycheck to paycheck, but it’s an important factor, especially for those living paycheck to paycheck by choice.

We find that just over 40% of people with $2,500 to $5,000 in savings still choose to live paycheck to paycheck. Those with less than $1,000 in income are both more likely to live paycheck to paycheck and more likely to do so by necessity. And with $1,000 to $5,000 in savings, they  feel they have some security but are more nervous, and an emergency expense of $1,200 might be enough to tip those scales.

The data also reveals a significant decline in self-reported paycheck-to-paycheck status once savings exceed $5,000. Those who continue identifying as paycheck to paycheck despite having over $5,000 saved appear to do so by choice rather than necessity, as they report comfort with their bill-paying ability including spending on discretionary items, while maintaining a safety net for unexpected expenses.

The largest generational cohort of consumers who report living paycheck to paycheck out of necessity are single millennials, many of whom live in rural locations. A third of those millennials have dependent children living at home — spending is about providing for their families, with little room for much else.

The $45,000 Paycheck-to-Paycheck Tipping Point

Analyzing five years of PYMNTS Intelligence data reveals two critical income thresholds in describing the financial lifestyle of consumers.

The data finds that the first significant threshold occurs at $45,000-$49,999, when individuals begin to shift from struggling paycheck-to-paycheck living to a more comfortable paycheck-to-paycheck lifestyle.

The second critical threshold appears in the $125,000-$149,999 range, where people become increasingly likely to say they no longer live paycheck to paycheck either by choice or necessity.

As income climbs to more than $85,000 per year the incidence of living paycheck to paycheck by choice begins to decline as more and more consumers indicate they no longer live paycheck to paycheck at all. What’s particularly interesting is that this shift is not universal, and many individuals with moderate to high incomes continue living paycheck to paycheck despite having the financial capacity to do otherwise. They’re comfortable paying bills but still spend most of their income monthly because of their monthly income and savings backstop.

Since these individuals can pay their bills comfortably, their continued paycheck-to-paycheck status suggests deliberate spending choices on more or more expensive things, rather than pure income constraints. These choices might include supporting dependents, purchasing larger homes or even second homes, or using private schools.

If paycheck-to-paycheck status were solely dictated by income necessity, we would expect to see a much steeper decline in all paycheck categories as income increases. However, the gradual nature of this decline suggests other factors at play, including the fact that consumers with incomes over $250,000 are 30% more likely to continue to live paycheck to paycheck (generally by choice).

The key insight is that even as financial capacity increases with higher incomes, many individuals continue to choose to live paycheck to paycheck rather than transitioning to non-paycheck-to-paycheck status.

Why Paycheck-to-Paycheck Status Matters Right Now

It’s been 15 years since the U.S. experienced a great recession, even though there was a slight dip in 2020 owing to the COVID shutdown. Today’s environment of economic uncertainty and rising prices, the threat of tariffs and the current administration’s hints at a likely recession have significant implications for all consumers and how they will spend their paychecks in the weeks and months ahead.

Consumers across all income brackets are likely to pull back on spending, but for different reasons. Those with savings cushions may voluntarily push pause on spending until they have more certainty in order to preserve cash and income, while those without financial shock absorbers in the form of savings will be forced to cut back out of necessity.

The “comfortable paycheck-to-paycheck” group faces particular vulnerability as economic pressures mount. The Fed is unlikely to lower interest rates in the foreseeable future, and if there is inflation because of tariffs, rates might go even higher. That’s bad news for consumers with adjustable mortgage rates that are set to rollover from historically low levels around 3% — just as interest rates on their credit cards and other loans rise. That means new monthly paycheck pressures owing to the increased cost of housing and credit card debt, especially if wages don’t keep pace.

As basic goods become more expensive due to tariffs and rising production costs, these consumers could also see their discretionary income significantly reduced.

PYMNTS Intelligence finds that more than half of consumers surveyed in February 2025 who are knowledgeable about the proposed tariffs said their wallets would take a beating; 78% said because of higher prices, and 75% because of product shortages. Many who were previously managing comfortably may find themselves sliding into the “struggling paycheck-to-paycheck” category as more of their paychecks are allocated to the basics whose monthly costs continue to rise.

Read more: What American Consumers and Small Businesses Think About Tariffs

That, of course, assumes consumers have a paycheck.

The Paycheck Economy

The labor market is starting to soften — and not because of the government layoffs, which impact a relatively small part of the American workforce overall. As businesses face their own uncertainty, they will likely freeze hiring, expenses and investments to grow the business. The ripple effect of this uncertainty itself is its own force.

As more consumers shift from choice-based financial decisions to those driven by necessity, overall consumption could contract, challenging economic growth. Retailers and service providers may need to adjust their strategies to address a growing segment of more price-sensitive consumers across income brackets if they hope to make a sale. Even wealthy consumers who don’t live paycheck to paycheck may pull back after looking at their stock portfolios and feeling less wealthy. Even the billionaires. Bloomberg reported yesterday (March 10) that the billionaires who attended President Trump’s inauguration have lost $210 billon collectively over the last seven weeks.

That detail aside, the data emphasizes that you can’t judge a paycheck-to-paycheck consumer by its cover. High earners who have structured their lifestyles around their full income with minimal savings could face similar challenges to lower-income households when economic conditions tighten.

The impact of economic uncertainty will be felt across the spectrum, with similar outcomes despite very different income and paycheck-to-paycheck starting points.

As Gaber said in his article back in May 2016, it’s about choices. It isn’t just how much money comes in, but the set of choices, obligations and priorities that determine where it goes.

In an economy increasingly characterized by unpredictability, understanding this nuanced reality isn’t just navel gazing. It also isn’t distorting the definition of paycheck to paycheck or its importance in understanding how consumers manage spending. It’s essential for understanding how consumers will react to financial pressures, and how vulnerable large swaths of the American consumer may be.

The economy’s resilience depends on their ability, in mass, to spend the paychecks they have — and knowing they’ll keep getting them.

The post Who Is the Paycheck-to-Paycheck Consumer in America? appeared first on PYMNTS.com.

The February installment of the Federal Reserve Bank of New York’s Survey of Consumer Expectations, released Monday (March 10), shows that while households’ medium and long-term inflation expectations were unchanged, consumers were less optimistic about their future financial situations.

According to the bank’s Center for Macroeconomic Data, this was accompanied by marked declines in expectations about unemployment, delinquency and credit access.

“Perceptions about households’ current financial situations compared to a year ago were mostly unchanged, but year-ahead expectations about households’ financial situations deteriorated considerably,” the NY Fed said in a news release.

“The share of households expecting a worse financial situation in one year from now rose to 27.4%, the highest level since November 2023.”

For example, the research found that the average perceived probability of missing a minimum debt payment in the next three months rose by 1.3 percentage points to 14.6%, the highest level in nearly five years. This increase was driven by Americans without a college degree, and was largest among consumers under 40.

The research also found that a larger portion of households say that accessing credit has grown more difficult, while a smaller share said getting credit is easier. 

“Expectations for future credit availability deteriorated considerably in February, with the share of respondents expecting it will be harder to obtain credit a year from now increasing to 46.7% from 35.6%,” the release said. “This reading is the highest since June 2024.”

The report comes two weeks after The Conference Board released its February Consumer Confidence Index, showing the largest monthly drop since August 2021.

Although consumers’ view of present business conditions improved, their expectations on current labor market conditions, future business conditions, future income and future employment prospects all deteriorated, the research found.

“References to inflation and prices in general continue to rank high in write-in responses, but the focus shifted towards other topics,” Stephanie Guichard, senior economist, global indicators at The Conference Board, said in a news release. “There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current Administration and its policies dominated the responses.”

Also Monday, a trio of banking regulators — the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency — released findings showing weakening credit quality among borrowers who owe more than $100 million.

As covered here, the regulators attributed the weakened credit quality trends to “the pressure of high interest rates on leveraged borrowers and the compressed operating margins in some industry sectors.”

The post NY Fed: Consumers Feeling Gloomier About Financial Futures appeared first on PYMNTS.com.

PYMNTS reported recently that data from the Federal Reserve revealed overall credit increased $18.1 billion during the first month of the year. Revolving debt was up by $9 billion. Nonrevolving debt, which includes auto loans, was up by about $9 billion, as measured month over month — and that follows a massive $18.9 billion surge in December.

The normalized pace still represents an “addition” to the overall monthly obligations. 

As reported here last month, the Fed’s latest data on delinquencies — with an eye on consolidated debt — showed gains at the end of last year, with 3.6% of outstanding debt in some stage of delinquency. As of the end of the fourth quarter, credit cards continued to be the loan type with the highest share of balance 90+ days delinquent, at 11.35%. This share grew 2% quarterly and 17% year over year.

Looking Toward FICO Creep

We may be headed into an age of “FICO creep,” where two things happen: The macroeconomic, exogenous shocks render the traditional tiers of credit scoring less reliable as a predictor of repayment behavior. And at the same time, there may be some slippage of those tiers, as super-prime consumers move toward prime status, prime consumers flirt with subprime status … you get the picture. 

At the end of last year, Experian noted that the average FICO score was 715, and that may be fluid amid the pressures and uncertainty. Indeed, PYMNTS Intelligence has found that 19% of consumers surveyed have indicated that they had reached card limits at least once in the past year.

And in the Fed’s latest survey of its district banks in the Beige Book, several respondents reported that consumer spending was declining and in some cases banks were pulling back on lending. The pressures are not coming from card loans. Earlier this month, Fitch Ratings said that the share of subprime auto borrowers who were at least 60 days delinquent on their payments climbed to 6.6%, a record level.

Who Benefits?

PYMNTS Intelligence indicated that among several credit profiles, there are about 63 million borrowers in the credit “marginalized” population, the vast majority of those with FICO scores spanning the 750 and below threshold (and more than 50% below 650). Experian has said that about 30% of U.S. consumers have FICO scores below 650 and are thus subprime. 

If — in an increasingly rocky macro environment, that would be “when” — banks tighten lending, and repayments are stretched, we’d see that aforementioned creep.  The credit marginalized populations would swell, and 29% of subprime, about 19% and 12.4% of super-prime consumers have already been denied at least on credit card application in the past year.

 Cash flow pressures would give tailwind to paying over time, especially with buy now, pay later (BNPL) options. BNPL is popular, particularly among consumers facing financial difficulties. According to PYMNTS Intelligence research accessible here,  consumers who frequently encounter cash flow problems are 3.5 times more likely to use BNPL, with 8.9% of these consumers using it in the past 30 days, compared to just 2.5% of those without the same pressures.

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