Are Consumers Cutting Back? New Data Says Not Exactly

Consumers don’t seem thrilled with the economy recently as the latest University of Michigan’s Index of Consumer Sentiment survey fell to 44.8 in May 2026, a record low in the monthly series.

And it’s not too surprising as higher fuel costs and inflation concerns continue to weigh on consumers, driving up the prices of the everyday goods that people need to live and threatening the future spending power of Americans’ retirement accounts.

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A recent survey from the Conference Board found that two-thirds of respondents plan to curb spending in response to higher gas prices. But not all recent spending data looks negative.

For instance, a new quarterly debit spending report from Galileo Financial Technologies shows a resilient consumer as well as some surprising debit card spending trends.

The CardRates team sat down with Brian Walsh, Head of Advice and Planning at SoFi, which acquired Galileo in 2020 and which SoFi says will be renamed SoFi Technology Solutions, to talk about the data and how debit card spend is growing in areas once dominated by credit cards.

CR: Consumers have seemed a little bit more cautious lately, but Galileo’s Debit Spend Index showed that spending was kind of bouncing back in March on debit cards. What do you think was driving consumer behavior in the first quarter?

BW: Realistically, the first quarter was a combination of challenges and then resilience at the same time by the consumers.

Ultimately, there was the start of the year where I think they cut back on certain things like subscriptions, for example. Maybe it’s related to New Year’s resolutions. Then also in the first quarter, we start to see the tailwind of tax refunds coming through. And by and large, those were higher this year.

And then you have the third layer with increasing expenses. So a lot of the essential things that people are buying — fuel is a major one — really went up in price. We saw more spending there.

So the ultimate story here is there’s been challenges with the cost increases, but consumers have remained resilient through it. I’m kind of in a wait-and-see pattern. Is this going to continue happening where it’s going to be absorbed in their budget, or will it lead to challenges down the road? Ultimately, only time’s going to tell.

CardRates: Card-on-file debit transactions made up 24% of all debit spending. Are consumers becoming more comfortable using debit for online purchases?

Brian Walsh: Overall, they are just being more comfortable with card on file across the board.

I think this is a balancing act for me as a financial planner. On one hand, storing the card on file just allows you to spend easier, which is amazing. But on the other hand, it can also lead to higher spending.

So I think as more people get comfortable with it, they’re just adopting it with both credit cards and debit cards just to make their financial lives a little bit easier.

CardRates: Travel spending on debit rose 37% from January to March. Why do you think more consumers are using debit for travel these days?

Brian Walsh: The other interesting thing too is related to travel. A lot of it was done through agencies, whether that be online agencies like Expedia, Priceline, those types of things. And generally speaking, we tend to see those be bigger purchases where people have maybe saved up for that.

I know a very common technique that people use that we work one on one with is they set up a separate vault and they’re going to build up their savings to plan ahead for a vacation. Kind of like a little mental accounting. They say, “OK, here’s what I had to spend,” and then they use that account to ultimately spend that.

So I think with travel costs increasing, we’re seeing more people ultimately building up for that and then spending it out of the same account. Whether that’s going to be a little bit easier than using a card and then paying it off, that’s probably the most logical explanation for why people are using a debit card for higher spending items as opposed to a credit card.

CardRates: Dining spend rebounded in both fast food and full-service restaurants. Does that signal growing consumer confidence, or are people still being selective with their spend?

Brian Walsh: I think it shows consumer confidence because so far what consumers have been doing is really just reallocating portions of their budget.

For example, on essential expenses, as gas prices went up and they spent more money on gas, other essential expenses went down to really absorb that. We’re seeing the same type of thing in discretionary spending.

As the season changes, some expenses are going to increase. Let’s say it becomes a little bit nicer out. People are going to spend more time outside. When it’s a little bit colder, they’re gonna spend more time inside, dining, fast food, those types of things.

So the fact that they’re really just reallocating spending within their budget, rather than just cutting across the board, definitely shows higher confidence and really leads to the overall resilient theme that I took away from this first quarter report.

CardRates: What do you think the payments industry misunderstands about how consumers want to manage their money today?

Brian Walsh: Overall, people want to have simplicity as much as possible.

Ultimately it’s balancing that simplicity and that convenience with responsibility. And I think that’s where providing the tools for people — whether it be the underlying infrastructure that Galileo supports or the digital money management tools that SoFi supports — is really important.

In my eight years at SoFi, that’s been a really cool aspect of it where it’s like, OK, we want to make it really convenient. We want to expand access at the same time. Let’s balance that off with educational resources, digital tools.

I think a lot of people miss that balancing act where they focus either too much on the convenience or they focus too much on the responsibility side. And it really is kind of two sides of the same coin that people are looking for.

CardRates: Was there anything in the Debit Spend Index that we didn’t really talk about that you think is worth talking about?

Brian Walsh: One of the things that jumped out at me was on the subscription side of things, because as a financial planner, I have a love-hate relationship with subscriptions.

On one hand, it’s so easy to go through and you get exactly what you want. Like a la carte menu is amazing. On the other hand, a lot of people buy a $10 a month subscription and then they forget about it. I know I’ve done it.

Seeing how people are in the beginning of the year, kind of reevaluating and auditing their subscriptions, and then towards the back half of Q1, they started increasing, that’s interesting to me.

Are people actually just being more efficient with their spending, or are we going to see in Q2, Q3 and beyond, are they just starting to add on top of it after a short drop? That’ll be really telling to me on how people are managing their money.

If they just continue adding the subscriptions, that can create challenges. If they are just recycling and auditing, that’s a great thing to see early part of the year and just spending money more efficiently.