Share of US Consumers Living Paycheck to Paycheck Hits Two-Year High

Despite a robust economy, a significant portion of American consumers are grappling with financial challenges that affect their shopping habits in profound ways, and to win their spending, merchants must understand these shoppers’ needs and preferences.

These consumers, earning $50,000 or less annually and living paycheck to paycheck, represent a substantial yet often overlooked segment of the market, PYMNTS’ Karen Webster highlighted in a Friday (June 21) feature. Their shopping behaviors are shaped by necessity and financial constraints, influencing both their purchasing decisions and their overall economic impact.

Here are five key factors informing these consumers’ shopping behaviors.

Back to Basics

Financially struggling consumers face a significant burden from essential expenses. Food, housing and monthly bills consume 72% of their income, leaving little for discretionary spending or savings.

This high percentage highlights the narrow margin within which they must operate, making it essential not only to cut back on nice-to-have items but also to find the best possible deals on necessities. The constant balancing act of managing expenses with limited income means these consumers are perpetually on the lookout for cost-saving opportunities.

Playing It Safe

Secondly, this consumer group relies heavily on cash and debit transactions due to limited access to credit. Findings from the PYMNTS Intelligence series “New Reality Check: The Paycheck-to-Paycheck Report” reveal that, while paycheck-to-paycheck shoppers with issues paying their bills have 17% of the credit cards out there, these cardholders only use credit for 20% of their purchases.

Conversely, Webster highlighted PYMNTS Intelligence findings that these consumers paid using cash or debit 27% more often than the overall population. This reliance on immediate funds rather than credit underscores the financial precariousness of their situation, as they cannot afford to accumulate debt they may be unable to repay.

The Physical Store

Financially struggling consumers show a marked preference for shopping in physical stores over online platforms, Webster notes. This choice is driven by a desire to examine products firsthand and compare prices, allowing them to make more informed purchasing decisions. Plus, the ability to pay with cash at checkout also aligns with their budgeting needs, as it provides a tangible limit to their spending, as counting out the bills can help them avoid overspending.

The Digital Boost

Consumers across all income levels who live paycheck to paycheck and struggle to pay their bills tend to be more digitally engaged than those who do not face such challenges, Webster wrote. Perhaps these consumers depend on their mobile devices for deal-seeking and price-checking features, clipping digital coupons and finding the best value. This increased digital engagement highlights their proactive efforts to stretch their limited resources and manage their finances more effectively.

The Superstore Advantage

These consumers are more inclined to shop at retailers known for their value, such as Walmart. When surveyed about their most recent purchases, 28% of financially struggling consumers named Walmart as their retailer of choice, a figure 27% higher than the average consumer. The draw of Walmart and similar stores lies in their ability, afforded by their scale, to offer lower prices on essential goods, which is crucial for consumers with tight budgets. The broad range of affordable products allows these shoppers to stretch their limited funds further.

The shopping behaviors of financially struggling consumers earning $50,000 or less annually are shaped by necessity, a reliance on physical stores and immediate payment methods, a preference for discount retailers, high digital engagement for cost-saving measures and a tendency to skip nonessential purchases. Understanding these patterns is crucial for retailers aiming to address the needs of this significant consumer segment.