According to Bank of America’s most recent Consumer Checkpoint, credit and debit card spending continues to tick upward. In March, we saw a year-over-year increase of 4.3%. In April, that number ticked up to 4.8%. As of May 2026, card spending increased 5.1% year over year — its strongest growth in almost four years.
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Discretionary Spending Increases
While it’s true gas prices have affected consumer spending, when adjusted to exclude gas, total spending still rose 3.9% year over year in May. Retail spending and services followed close behind as spending contributors.
Within services, discretionary spending was high as travel and tourism and restaurant spending were strong. This data — coupled with data uncovered in U.S. News’ annual travel survey — indicates consumers are resilient in the face of financial uncertainty and determined to enjoy their summer.
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Bargain Hunting
Even as retail spending is strong, Bank of America noted consumers are taking more frequent trips when shopping at general merchandise stores — but their spending doesn’t match. This suggests consumers are actually bargain hunting when shopping.
Transactions above $500 increased or remained the same year over year in categories such as airlines, furniture, lodging and motor vehicles. However, electronics is in the only category that showed evidence of consumers choosing smaller ticket sizes.
Yet this might have more to do with what consumers themselves can control. There are more options for someone to choose, say, a less expensive cellphone versus needing a flight to a specific destination on a certain day.
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K-Shaped Economy Persistent but Possibly Waning
Card spending rose 4.1% year over year for lower-income households, 4.3% year over year for middle-income households and 5.4% year over year for higher-income households.
Now, this may still seem like a bit of a difference, but this is actually evidence of that K-shaped gap narrowing to its lowest level since June 2025.
Bank of America also saw a similar narrowing in the after-tax wage gap, according to its customer deposit data. Wage growth for higher-income households slowed to 5.6% from 5.9% year over year in April.
In contrast, wage growth for lower-income households and middle-income households rose. Middle-income earners saw an increase of 3.5% year over year, while lower-income earners saw a growth of 3.1% — the highest rate since January 2025.
Bank of America does note, however, that the increase in wage growth could be partially attributed to additional hiring in service industries ahead of the FIFA World Cup. So we won’t know for several months if this is a blip on the radar or evidence of an ongoing trend.
Once the effects from the World Cup and higher gas prices settle in, we should be able to see for certain if the K-shaped economy is truly closing its gap.
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These Numbers Suggest the K-Shaped Economy Has Finally Begun to Close Its Gap originally appeared on usnews.com
