Luxury vacations are taking off again, but TD Bank believes the momentum will be short lived. The U.S.-based financial firm released its annual 2023 Consumer Spending Index, revealing that four out of five consumers have had their spending habits impacted by inflation, with over half of them turning to discounts and promotions (57%) and seeking lower-priced options (53%) to combat inflation.
With luxury vacations as an implied element of the spending portrait, the survey polled more than 1,000 Americans in June to gauge shifts in consumer spending behaviors and credit usage. As inflation continues to impact all Americans, respondents are prioritizing rewards and showing signs of high financial literacy – underscoring the importance of responsible financing during economic instability.
“Consumers are undoubtedly continuing to feel the impact of inflation and rising interest rates,” said Chris Fred, Head of Credit Cards and Unsecured Lending at TD. “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.”
A Focus on Necessities
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 luxury 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,” said Fred. “We heard from consumers that they are looking for more breathing room.”
In response to these changing needs, financial institutions such as TD Bank are infusing more flexibility into cardholding privileges, such as options to “Skip a Payment” once a year or enter a vacation savings plan.
Interest Rates To continue
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.
“TD Bank recently released TD Clear to create an option for credit-cautious consumers,” said Fred. “This card replaces interest and other fees with a set monthly fee, to provide a simple and transparent credit card. It’s the first of its kind in the U.S. market.”
Luxury Vacations Aided Rewards Programs
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 are 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.
Luxury Vacations Fade Behind Expiring Points
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 say they let their rewards expire because they simply forgot to redeem their points.
Demand for Digital
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%) prefer to pay their bills online or through an app. Digital banking has become so important to consumers, that more than half (55%) say they decide which card to get based on the digital experience provided.
Digital Wallets are also rising in popularity, particularly among younger consumers. 72% of survey respondents set up a mobile wallet in 2023, and 82% of mobile wallet users are between the ages of 18-34 years old. The survey showed a 12% increase in the total mobile wallets set up in 2022 (60%) compared to 2023. Only 42% of consumers ages 45 years and older are concerned about cyber security and do not use a digital wallet because of this.

Get Social