Core Insights - The shift from credit card spending to more cautious financial management among American consumers is significant, driven by high interest rates and economic pressures [1][5] - Credit card spending growth has slowed, with debit card spending increasing, indicating a fundamental change in consumer behavior [1][5] Consumer Spending Trends - In the first half of the year, debit card spending grew by 6.57% year-on-year, while credit card spending only increased by 5.65% [1] - This marks a reversal from the previous 14 quarters where credit card spending growth outpaced debit card spending [1] - The average annual interest rate on credit cards has reached 22%, prompting consumers to seek lower-interest personal loans [1][2] Debt Management - The transition to personal loans from credit cards is primarily a debt substitution rather than a solution to underlying debt issues [2] - Personal loan issuance increased by 18% year-on-year in Q1, reaching a record $257 billion [1][2] - Concerns about potential debt cycles arise as personal loans may lead to sudden worsening of debt situations when repayment periods begin [2] Employment and Economic Factors - The U.S. job market is cooling, with non-farm employment growth at 73,000 in July, below expectations, and an unemployment rate rising to 4.2% [3] - Young consumers face the most significant employment and debt pressures, with a notable percentage of credit card holders aged 18-29 experiencing overdue payments [3] - The rise of "buy now, pay later" schemes has also contributed to reduced credit card usage among younger demographics [3] Financial Behavior Changes - Over 40% of credit card holders are now making partial payments or only paying the minimum, reflecting a shift towards defensive financial strategies [4] - Many households are prioritizing essential spending and debt reduction over expansionary consumption [4] - Historical reliance on credit for economic growth is being challenged, with increasing debt levels leading to higher default rates [4][5] Economic Outlook - The U.S. economy is undergoing a structural transformation, with consumer spending growth projected to slow significantly in the coming years [5] - Fitch Ratings forecasts consumer spending growth to drop to 1.8% from 2.8% in 2024 [5] - The dual pressures of high interest rates and tariffs are forcing consumers to adapt their spending habits, indicating a broader economic adjustment [5]