Americans lean on credit cards and buy now, pay later as gas prices eat bigger share of income

Lower-income households are now spending 4.2% of income on gas, up from 3.9% a year ago and the highest March level since 2022, while the average household is spending 3.1%. Gas prices have surged more than 40% as oil rose above $100 a barrel amid Iran-related supply disruptions, pressuring consumer budgets and pushing more households toward credit cards and buy now, pay later. The article also notes wage growth remains weak for lower-income consumers at about 1% through March, partly offset by higher tax refunds and elevated savings deposits.

Analysis

The immediate equity signal is not the gasoline price itself, but the financing behavior it forces. When lower-income households smooth fuel costs with revolving credit and BNPL, the first-order damage to consumption is deferred, not eliminated; that delays the hit to retailers, restaurants, and discretionary hardlines by a few weeks to a couple of months. The second-order risk is a flatter, longer malaise in basket size and purchase frequency rather than a clean spending cliff, which is harder for the market to price but more corrosive to margin expectations.

For BAC specifically, the direct read-through is mixed-to-slightly negative: credit usage can support NII in the near term, but higher utilization among lower-FICO cohorts raises the probability of revolving balance growth coming alongside seasoning drag and eventual charge-offs if fuel remains elevated into summer driving season. The more interesting issue is that banks with stronger consumer deposit franchises may see a temporary deposit cushion from refunds and still face a deteriorating mix in unsecured credit exposure over the next 1-2 quarters. That argues for watching delinquencies in subprime autos, unsecured cards, and BNPL-linked merchants as leading indicators rather than waiting for headline consumer-spend data.

The contrarian point is that this looks more like a timing issue than a durable macro shock unless energy prices stay elevated into late Q3. Tax refunds and excess deposits are providing a bridge, so the consensus may be overestimating near-term demand destruction while underestimating the eventual cliff if fuel prices remain high once refunds fade. The market should treat this as a volatility setup: if gasoline normalizes quickly, the consumer scare unwinds; if it doesn’t, the pain migrates from fuel-sensitive households into credit losses and retailer earnings revisions with a lag.

From a cross-asset perspective, the best expression is to fade the most credit-sensitive domestic consumer exposures rather than chase energy beta. The winners are cash-flow-rich, non-discretionary franchises and potentially banks with stronger NII buffers; the losers are subprime lenders, BNPL-adjacent platforms, and consumer discretionary names dependent on lower-income traffic. Timing matters: the next 4-8 weeks should show whether gas is a transitory budget nuisance or the start of a broader slowdown in revolving consumer spend.

Key Decisions for Investors

• Short XRT or regional-discretionary names with lower-income exposure over the next 4-8 weeks; target a 1.5-2.0x payoff if retail comps soften into the summer, stop if gasoline retraces meaningfully below current levels.
• Pair trade: long BAC / short SYF or DFS for 1-2 quarters to express the view that larger-bank funding strength offsets rising unsecured-credit stress; monitor card delinquencies as the invalidation point.
• Reduce exposure to BNPL-adjacent and subprime consumer-credit names for 2-3 months; the risk/reward is skewed against them because the credit bridge only delays, rather than removes, the spending hit.
• Consider a tactical long on staples or off-price retail versus discretionary retail for the next earnings cycle; if fuel stays elevated, traffic should migrate toward value and necessity channels.
• If gasoline prices reverse sharply, cover consumer shorts quickly: the setup is asymmetric because the market is likely to over-discount the slowdown while refunds and deposit buffers remain in place.