FICO to factor BNPL into credit scores this fall

In recognition of the increased use of Buy Now Pay Later (BNPL) programs by American consumers, FICO is launching a version of its credit scores that takes into account BNPL activity. The new credit scores are expected to be available in the fall of 2025. For individuals who struggle to qualify for traditional credit, factoring in BNPL transactions could be a way of building a credit history. Inclusion of those transactions will depend on whether the BNPL lender reports activity to the credit bureaus. The credit history will record BNPL and may be positive or negative depending on whether consumers pay on time. However, not all credit scores will include BNPL transactions. See article at Yahoo.com.

Mixed credit results for consumers in May 2025

The latest TransUnion Credit Industry Snapshot revealed both positive and negative trends for consumers in May. Average balances owed increased for credit cards and mortgages, but decreased for unsecured personal loans. Rates of serious delinquencies on payments rose for auto and unsecured personal loans, but declined for credit cards and mortgages. However, the falling rates of seriously delinquent accounts for credit cards and mortgages might prove short-lived. Serious delinquency rates for these forms of credit refer to those that are 90 days or more overdue. While those rates dropped in May, shorter-term delinquency rates rose for both credit cards and mortgages. That means more consumers with those forms of debt have fallen behind recently. See details at TransUnion.com.

Consumer confidence drops sharply in June 2025

The Conference Board’s Consumer Confidence Index fell by 5.5% in June. This erased roughly half of the progress made in May, leaving the Index substantially down for the first half of 2025. The component of the Index that measures current business and labor market conditions fell by 4.7% during June. The Expectations Index, which measures the economic outlook consumers have for the near future, fell by nearly 6.3%. This left the Expectations Index well down into a range that has traditionally been associated with recessions. Tariffs and inflation continue to be issues that weigh most heavily on people’s minds. See news release at Conference-Board.org.

Existing home sales sluggish in May 2025

The National Association of Realtors reported that sales of existing homes rose at a seasonally-adjusted pace of just 0.8% in May. Year-over-year, sales of existing homes declined by 0.7%. The sluggish pace of sales led to a 6.2% increase in unsold inventory on the market. That inventory now represents 4.6 months’ worth of supply. Different regions of the country experienced differing trends in existing home sales. For May, sales volume increased in the Northeast, Midwest, and South, while it decreased in the West. Year-over-year, sales increased in the Northeast and Midwest, while they declined in the South and West. See details at NAR.Realtor.

Home price growth cools in April 2025

The latest release of the S&P CoreLogic Case-Shiller U.S. National Home Price shows that home prices continued to grow in April, though at a slower pace than the previous month. The Index rose by 0.61% in April, compared with 0.77% in March. Year-over-year, national home prices are up by 2.72%. See home price data at SPGlobal.com.

2025 Q1 GDP drop deeper than first reported

The final estimate for the first quarter of 2025 Gross Domestic Product (GDP) showed that the economy’s decline during the quarter was worse than previously thought. The change in GDP was revised downward from -0.2% to -0.5%. The figures are reported at an annual pace and after seasonal adjustment. The decline in GDP during the first quarter indicates an abrupt slowdown in the economy, following a 2.4% annual growth rate in real GDP in the fourth quarter of 2024. It’s too early to tell whether this decline is just a temporary blip or a sign of the beginning of a recession. See GDP report at BEA.gov.

Mortgage rates dip for fourth straight week

30-year mortgage rates fell by 0.04%, to reach 6.77%. This was the fourth consecutive week in which mortgage rates have fallen, though in each case the moves have been slight. 30-year mortgage rates fell by a total of 0.12% in June. 15-year mortgage rates have also fallen for four weeks in a row. The decline in 15-year rates has totaled 0.14%, leaving them at 5.89%.

Personal income and spending declined in May

US personal income fell by $109.6 billion in May, a 0.4% decline. This is an ominous sign for the U.S. economy. With personal income falling, consumers began to rein in their spending. Personal consumption expenditures fell by 0.1% during May. Cuts to government benefit payments and loss of income by farm proprietors were cited as leading reasons for the decline in personal income. See report at BEA.gov.

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June’s Fed meeting came and went without any change in the Federal funds rate. The decision reflects a growing problem: the economic indicators the Fed relies on are increasingly pointing in opposite directions.

Slowing economic growth and rising unemployment typically call for lower rates, but renewed inflation concerns are pulling the other way. This tug-of-war is leaving 2025 interest rates in limbo.

The Fed expects economic signals to move further apart

After the Federal Open Market Committee met on June 17 and 18, it released updated projections showing greater conflict between key economic indicators.

On one side, the Fed lowered its expectations for GDP growth and raised its unemployment forecast. That indicates it expects the economy to weaken more than previously thought.

At the same time, it raised projections for inflation in 2025 and the two years that follow. That means it sees price pressures remaining higher than hoped.

The Fed tries to balance two main goals: encouraging employment and limiting inflation. Lower interest rates can support job growth, while higher rates are often used to control inflation. Because those two responses are at odds with each other, tension between the Fed’s goals is not new. But now that tension appears to be growing.

Interest rates remain unchanged

At the end of its June meeting, the Fed announced it was holding the Federal funds rate steady at a target range of 4.25% to 4.5%.

This decision disappointed some, including President Trump, who has repeatedly called for cuts. However, Fed Chair Jerome Powell does not act alone. The rate-setting committee voted unanimously to leave rates unchanged, reflecting broad agreement that the economic situation does not support a move right now.

As recently as September, the Fed expected to lower rates to 3.4% by the end of this year. Instead, its latest projection shows a year-end rate of 3.9%, which is half a percentage point higher. It has also raised its rate expectations for 2026 and 2027.

Inflation uncertainty continues to weigh heavily on rate decisions. The Fed is not raising rates at this point, but it does not believe conditions justify lowering them either.

Inflation concerns have not gone away

One reason the Fed is drawing criticism for holding off on rate cuts is that inflation has remained relatively calm in recent months. Inflation remained calm with modest monthly price increases through much of 2024.

However, the Fed bases its decisions on where the economy is going, not just where it is now. Tariffs that have been announced are not yet fully reflected in prices. There are delays between when tariffs take effect and when their impact reaches consumers. Retailers often have existing stock to sell through first.

On top of that, ongoing conflict in the Middle East creates the possibility of rising oil prices, which can drive up costs across many sectors.

The Fed also considers how inflation can build on itself. Higher import prices can lead to domestic price increases. Companies may raise prices due to rising input costs, and employees may push for higher wages in response. This feedback loop can create lasting inflation that is harder to reverse.

To provide some perspective, the current rate is lower than the historical average. Over the past 50 years, the Federal funds rate has averaged 4.69%. Today, it sits at 4.33%.

Since August of last year, the Fed has lowered rates by a full percentage point, from 5.33% to 4.33%. So while it has not made deep or frequent cuts in 2025, it has already moved rates below the long-term norm.

The criticism is not that the Fed has done nothing. It is that it has not gone as far as some would prefer.

Consumer interest rates often move independently

From a consumer perspective, the Fed’s decisions may not matter as much as headlines suggest. Even when the Fed does cut rates, the impact on what consumers actually pay can be small.

For example, between mid-2019 and early 2020, the Fed cut rates by 2.25%. During that same period, the average interest rate on credit card balances dropped by only 0.53%.

In the second half of last year, the Fed cut rates by 1.0%, but 30-year mortgage rates fell by just 0.01%.

That is because consumer rates do not track the Federal funds rate exactly. Both are influenced by broader market factors, including credit risk and inflation expectations.

As the economy slows, lenders tend to raise rates to account for higher risk, especially on unsecured debt like credit cards. For borrowers with lower credit scores, those increases can be even steeper. Credit conditions may tighten, making it more difficult or expensive for some consumers to access credit at all.

Meanwhile, long-term mortgage rates are often more sensitive to inflation expectations than to short-term interest rate moves.

Broader changes are needed for real consumer relief

The Fed’s projections suggest that concerns about inflation are growing while the economic outlook is weakening. That is a difficult environment for lowering interest rates.

To see meaningful improvement in borrowing costs, several things would need to happen. A stronger economy could reduce credit risk. A shift in trade policy or global tensions could ease inflation pressure.

Until those conditions change, the Fed may have limited ability to affect consumer borrowing costs. The bigger issue is not whether the Fed chooses to cut rates. It is whether the economy provides the conditions that allow those cuts to make a difference.

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Retail sales took a hit in May 2025

U.S. retail sales suffered a bigger drop than was expected in May. Retail sales fell by 0.9% during the month, more than the expected decline of 0.6%. Year-over-year, retail sales were up by 3.3%, a substantial slowdown from the 5% gain through April. In part, the sharp drop in retail activity in May was a recoil from unusually strong activity the prior month. In April, consumers had rushed to buy big-ticket items such as vehicles to get ahead of new tariffs. Notably, auto sales declined by 3.5% in May. See article at MSN.com.

Fed dampens expectations for rate cuts again

The Fed entered 2025 expecting to make multiple rate cuts during the year. However, after its recently completed meeting, the Fed announced that it still isn’t ready to make its first rate cut of 2025. The Fed’s rate target remains 4.25% to 4.5%. Besides holding off on cutting rates, the Fed has also reduced its projections for future rate cuts. While the Fed still expects to cut rates by half a percent this year, its rate targets for 2026 and 2027 are not as low as previously. Last September, the Fed issued projections showing that it expected the Fed funds rate to drop to 3.4% in 2025, 2.9% the following year and remain at 2.9% in 2027. Those targets have since been elevated to 3.9% for this year, 3.6% for next year and 3.4% for 2027. See Federal Open Market Committee Statement at FederalReserve.gov.

Tariff fears eroded household wealth in Q1 2025

U.S. households and nonprofit organizations lost a combined $1.6 trillion in the first quarter of 2025. The loss of wealth was caused by the stock market’s decline due to concern over the impact of tariffs. Meanwhile, household debt rose by 1.9% during the quarter. See article at Reuters.com.

U.S. workforce faces labor shortage

The U.S. needs to add an average of at least 4.6 million workers a year between now and 2033 to maintain a workforce sufficient to meet the country’s needs. This is according to a new report by the Committee for Economic Development (CED), which is the public policy center of the Conference Board. The CED warns that policy changes to expand the labor force are needed to avoid a shortage of workers in the years to come. Policy changes it recommends include reforms to the Social Security earnings test, gearing immigration rules towards admitting qualified workers, encouraging flexible work arrangements and making childcare more readily available. See news release at Conference-Board.org.

First-time buyers now spend nearly 60% of income on mortgages

A new study from the JPMorgan Chase Institute shows that mortgage payments are now taking up 45 percent more of household budgets than they did in 2019. Home prices have increased by 50 percent over the same period, and mortgage rates have also risen. Both factors are pushing up monthly costs. For people aged 25 to 44, who make up most first-time homebuyers, a typical mortgage payment used to take up 40 percent of their disposable income. By 2024, that had increased to 57.5 percent. See article at Realtor.com.

Government agencies team up to fight fraud

Various federal banking agencies issued a joint announcement of intentions to coordinate efforts to fight fraud. The statement was issued by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Reserve. Besides the cooperation on the federal level, the statement signaled an intent to work with state regulatory agencies. A particular area of emphasis is check fraud, which has soared in recent years. See article at PaymentsDive.com.

Budget cuts affect collection of economic data

Citing a lack of resources, the U.S. Bureau of Labor Statistics (BLS) announced that it was cutting back on the data collection efforts that go into calculating the Consumer Price Index (CPI). The CPI is the most widely followed measure of U.S. price inflation. The data affects financial markets, cost-of-living adjustments and economic policy decisions. The BLS explained that it is reducing sample collection efforts, including suspending data collection in some cities. See announcement at BLS.gov.

Sales of new homes slowed sharply in May

Applications for mortgages to buy newly-built homes dropped 9% in May compared with the previous month. Completed sales of new, single-family homes suffered an even steeper drop, falling by a seasonally-adjusted 12.1% in May. The drop-off in May reverses a large jump in new home sales in April, and is more in line with the level of activity seen earlier in the year. Mortgage rates rose sharply in mid-April. This, along with a significant level of economic uncertainty and a growing inventory of existing homes for sale, is thought to have contributed to the sharp decline in new home sales in May. See commentary at MBA.org.

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Being in control of your finances, regardless of your income level, may help ward off negative mental health symptoms such as depression and anxiety. That is one conclusion suggested by a new study led by a professor at Johns Hopkins University.

The study, published in the American Journal of Epidemiology, found a correlation between higher credit scores at the ZIP code level and lower rates of depression and anxiety symptoms among residents in those areas. In other words, people living in areas with stronger average credit scores were less likely to report those symptoms.

There is no magic formula to fix your credit or your mental health. However, what they have in common is that understanding the problem and working on ways to address it can go a long way toward making you feel more in charge of the situation.

How the survey was conducted

The study was based on mental health survey data from more than half a million adults in Pennsylvania. Key to the study were two questions from the Carnegie Mellon University COVID-19 Trends and Impact Survey, conducted in partnership with Facebook:

• In the past five days, how often have you felt depressed?
• In the past five days, how often have you felt nervous, anxious, or on edge?

Researchers matched responses to these questions with the average credit scores of the respondents’ ZIP codes. This showed that people in higher-credit-score ZIP codes generally reported fewer symptoms of depression or anxiety than those in areas with lower scores.

An average of 10.9% of adults in high-credit-score areas reported symptoms of depression, compared with 13.7% in lower-score areas. Similarly, an average of 14.9% of adults in high-score areas reported anxiety, compared with 17.4% in lower-score areas.

Of course, there are many factors besides credit conditions that can contribute to mental health struggles. Notably, people living in high-credit-score areas still reported symptoms of anxiety and depression. However, the numbers suggest that when financial pressures are reduced, it may help improve overall well-being.

Living within your means appears to be key to happiness

While it is true that higher-credit-score ZIP codes tend to be wealthier, the study adjusted for ZIP-code-level income, unemployment, education, and other factors. The pattern linking credit score and mental health remained even after those adjustments.

This is important because it is possible to maintain a good credit score despite having a modest income.

A Credit Sesame survey found that people with higher incomes tended to have higher credit scores than those with lower incomes. Undoubtedly, making more money makes making ends meet and paying on time more manageable.

Significantly, even among people making less than $50,000 a year, there were more people with good to excellent credit than with poor or fair credit. The takeaway is that you do not have to let your income define how you manage your finances – or your happiness.

The chicken-egg relationship

Looking at the results of the new study does bring up questions about the nature of the relationship between credit and mental health. It boils down to a chicken-or-egg question: which comes first, credit challenges or symptoms of anxiety and depression?

Credit difficulties may lead to feelings of stress or helplessness. At the same time, mental health struggles can make it harder to stay on top of financial responsibilities. It may be that credit issues and mental health concerns reinforce one another, making it especially important to address both when possible.

Taking control of your credit history can be empowering

If you frequently experience anxiety or depression, it is important to consider seeking help from a qualified mental health professional. Support can benefit many areas of life, including your financial situation.

At the same time, if you have credit challenges, taking steps to address them may help you feel more empowered and less overwhelmed.

It may take time to see results. But even just having a plan and working on it can give you a greater sense of control over your financial life, which might contribute to a better sense of well-being.

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Consumer inflation slows to 0.1% in May 2025

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by just 0.1% in May. That’s less than April’s 0.2% rise, and projects to a slower annual pace of inflation than the 2.4% rise in the CPI over the past 12 months. The core inflation rate, which excludes food and energy, was also 0.1% for May. The core rate is a little higher than the overall rate for the past 12 months, at 2.8%. The overall rate was kept lower by a 12% drop in the price of gasoline over the past year. See news release at BLS.gov.

Producer prices edge higher after two-month decline

The Producer Price Index (PPI) rose by 0.1% in May. Though that’s a mild increase, it represents a rise in the pace of producer inflation after the PPI declined in each of the two previous months. Prices for both goods and services both rose at the same 0.1% rate in May. Producer prices tend to vary more month-to-month than consumer prices, but eventually inflationary trends in producer prices tend to filter through to consumers. See news release at BLS.gov.

Tariff concerns lead businesses to pause spending and hiring

A survey by Provident Bank found that 70% of US business owners are “very” or “moderately” concerned about the impact of tariffs on their businesses. 42% said they plan to delay major capital spending, and 30% said they have stopped hiring. Overall, 55% of US business owners feel tariffs will hurt the economy. Despite all these concerns, 60% of business owners believe the economy will grow over the next six months. See article at BankingJournal.ABA.com.

Consumer outlook improves as inflation fears ease

The Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations found that people’s financial outlook improved on a few fronts in May. The average inflation expectation for the year ahead dropped by 0.4%, to 3.2%. The perceived probability of losing one’s job sometime during the next year fell by 0.5%, to 14.8%. Household income is expected to grow by 2.7% over the next 12 months, up from 0.1% from the expectation in April. Debt fears calmed a bit, as the median probability of missing a debt payment over the next three months dropped by 0.5%, to 13.4%. Finally, spending is expected to grow by 5.0% over the year ahead. That is 0.2% less than expected in April, though it still exceeds the average of 4.9% over the past year, which means households would be raising spending faster than incomes and inflation. See summary at Federal Reserve Bank of New York.

Study links higher credit scores to better mental health

A study led by a Johns Hopkins professor found that people living in areas with higher credit scores are more likely to be mentally healthy. People who live in areas with excellent average credit scores had a 10.9% chance of showing signs of depression. For people in areas with mediocre credit scores, the depression rate rose to 13.7%. 14.9% of people in excellent credit areas reported feeling anxiety. In regions with mediocre credit scores, the rate of anxiety was 17.4%. The relationship between higher credit scores and better mental health was observed even after adjusting for income and demographic factors. See article at PublicHealth.JHU.edu.

Consumer credit use rebounds in April, led by credit cards

The Federal Reserve’s monthly report on consumer credit found that borrowing accelerated in April. Consumers had reined in borrowing during the first three months of the year, but their use of credit grew at an annual pace of 4.3% in April. It had averaged a pace of 1.3% during the first quarter. April also showed the return of a preference for revolving debt. This debt, mostly credit card balances, grew at a 7% annual rate in April, compared with a 3.3% rate for loan debt. This is concerning because revolving debt is generally more expensive than nonrevolving debt. All figures are adjusted for normal seasonal differences, so the arrival of Spring doesn’t account for the revival of borrowing. See consumer credit data at FederalReserve.gov.

Mortgage rates remain stable for ninth consecutive week

30-year mortgage rates eased by 0.1% last week, to 6.84%. 15-year rates fell by 0.2%, to 5.97%. The minimal change continues a streak of nine weeks in which 30-year rates have remained in a tight range of 6.76% to 6.89%. 30-year rates are now one basis point lower than when the year began, and 0.76% higher than the low point reached at the end of last September. See mortgage rate details at FreddieMac.com.

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Confidence among America’s chief executive officers (CEOs) has just experienced its steepest drop since 1976, according to a new survey.

When concern rises at the top, it often trickles down. If business leaders are bracing for trouble, it may be time to prepare yourself. The good news is that a few smart steps now could put you in a much stronger financial position.

Survey shows a drastic drop in CEO confidence across the U.S.

The Conference Board is a nonpartisan, nonprofit organization that analyzes business conditions and provides insight to executives. As part of this effort, they keep a finger on the pulse of business leaders with regular surveys of chief executive officers.

A May 2025 survey found that CEOs have become more concerned about the economy in recent months. In fact, the decline since the previous quarter was the largest in the survey’s history, which dates back to 1976.

How worried are America’s business leaders? Here are some signs that concern is rising:

• 82% of CEOs said economic conditions had worsened over the past six months, compared to just 2% who said they had improved.
• 69% said conditions in their industry had deteriorated, compared to 7% who reported improvement.
• 64% expect economic conditions to decline further over the next six months, while only 18% expect improvement.

How bad could things get? 83% of CEOs expect a recession in the next 12 to 18 months. That is up from just 30% late last year.

What is driving these concerns? The top three issues cited were:

• Geopolitical instability
• Trade and tariffs
• Legal and regulatory uncertainty

Overall, economic concern among business leaders is rising quickly, and that level of caution could influence broader decisions affecting jobs, wages, and investment.

How CEO pessimism can affect the workforce

CEO concerns are not always accurate predictions, but they often shape real decisions that affect employees. When executive confidence falls, it can ripple through hiring, pay, and investment plans.

Here are some examples of how CEO pessimism might affect the workforce:

• Slower hiring. One of the first things that happens when leadership faces uncertainty is a delay or cancellation of hiring plans. This may already be happening, as job growth has been sluggish so far in 2025.
• Wage increases become stingier. As demand for workers eases and budgets tighten, companies feel less need to pay up to retain employees. Your next raise may be harder to come by.
• Employee perks are trimmed. One way to cut employment costs without the morale hit of reducing pay is to eliminate some employee perks. Everything from the company picnic to 401(k) matching contributions could be affected.
• Investment slows. R&D, new plant and equipment, and ad campaigns are all expenses that do not pay off immediately. CEOs may become more hesitant to invest in the future during periods of economic uncertainty.
• Layoffs start. Once demand slows, companies may look to reduce headcount to protect the bottom line.

To some extent, CEO pessimism can become a self-fulfilling prophecy. When companies reduce spending and cut jobs, it can weaken the broader economy.

How to protect yourself in an uncertain economy

When your company’s head is worried about the economy, it can affect you in several ways. In response, here are some things you can do to get ready:

• Build a little cushion into your budget. Whether it’s a smaller bonus, having your hours cut or even losing your job, economic concerns could affect your take-home pay. This would be a good time to take a look at your budget to see which costs you can reduce or eliminate.
• Rein in borrowing. If you’ve been borrowing regularly to make ends meet, it would be wise to break that habit. If the economy worsens, look for lending standards to tighten. It might become harder to get new credit, and existing credit limits might even be cut.
• Raise emergency savings. If you don’t have one, this would be a good time to start an emergency fund. If you already have one, this might be a good time to build it up. If the job market weakens, more people may lose work, and it may take longer to find a new job. A larger emergency fund could help you stay afloat.
• Work on your credit score. This could help you retain access to credit even if the economy weakens.
• Update your job skills. Look for ways to increase your value to your employer. That may keep you off any layoff list. It would also make you a more attractive candidate if you have to find a new job.

Taking steps to prepare for a rough economy may not change what executives do next, but it could make a real difference in how well you weather it. Building financial stability now can help you feel more secure, even if the road ahead is uncertain.

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Job growth slowed in May 2025

The Bureau of Labor Statistics reported that the US economy added 139,000 jobs in May. That marked a decline in employment growth from the 147,000 jobs added in April and from the monthly average of 149,000 over the past 12 months. In other signs of weakness for the job market, the estimates for employment growth in March and April were both revised down by significant amounts. Job growth in April was initially announced as 177,000 but has been revised downward by 30,000 to 147,000. Job growth for March was initially announced as 228,000. It was first revised downward by 43,000 to 185,000, and now has been revised downward again by another 65,000 to 120,000. In other words, job growth for March now seems to have been 108,000 lower than initially announced. See jobs report at BLS.gov.

Consumers hit the brakes on spending growth

The growth rate of consumer spending slowed drastically in April 2025. According to the latest report on Personal Income and Outlays from the Bureau of Economic Analysis, personal spending grew by just 0.2% during the month. This represents a sharp slowing from a 0.7% growth rate in March. Spending on services grew by 0.4% during April, but spending on goods declined by 0.1%. See report at BEA.gov.

Uncertainty weighs on economic growth

The latest Federal Reserve report on economic activity around the US showed that half of the 12 districts reporting to the Fed showed declines in economic activity since April 2025. Besides the six districts reporting less activity, three showed no change and three showed slight growth. The report found elevated levels of economic and policy uncertainty coming from businesses and households in all districts. This uncertainty has created greater caution in business and household financial decisions. See article at ABA.com.

US and global economies expected to slow

The Organization for Economic Cooperation and Development (OECD) released new economic projections for 2025 and 2026. Overall, the global economy is expected to grow at a 2.9% annual rate this year and next. That’s a slowdown from last year’s 3.3% growth and from the OECD’s previous forecast of 3.1% for this year and 3.0% for next year. The outlook for the US economy is also worsening. The OECD now forecasts that the US economy will grow by 1.6% this year and 1.5% next year. That’s in contrast to 2024’s 2.8% growth and the OECD’s previous forecasts of 2.2% this year and 1.6% next year. The OECD also warned that growth could slow further if tariffs are raised again. See article at Reuters.com.

Mortgage rates ease slightly

Both 30-year and 15-year mortgage rates dropped by four basis points last week. That left 30-year rates at 6.85% and 15-year rates at 5.99%. Mortgage rates have been relatively stable since mid-April. 30-year rates are now exactly where they were when the year began, and 14 basis points lower than they were a year ago. See rate details at FreddieMac.com.

Productivity declines for the first time since 2022

Non-farm business productivity fell by 1.5% in the first quarter of this year. That’s the first decline in productivity since the second quarter of 2022. Productivity declines can signal trouble for the economy. Lower productivity means it is becoming more expensive to produce goods and services, which can fuel inflation. Also, productivity tends to decline when demand slows, as businesses are no longer operating close to their full capacity. See productivity report at BLS.gov.

CEO confidence has plummeted since last quarter

According to a Conference Board survey of CEOs, the confidence level of American business leaders suffered the largest quarter-to-quarter drop in the history of the survey, which goes back to 1976. Geopolitical instability was cited as the leading business risk, followed by trade and tariffs. 82% of CEOs said economic conditions were worse than six months ago, compared to just 2% who said they were better. 64% of CEOs expect conditions to get even worse over the next six months, compared to 18% who expect them to improve. 83% of CEOs now expect a recession over the next 12 to 18 months. See news release at Conference-Board.org.

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Think you’re doing fine financially? The Fed’s new survey says maybe not

Many Americans believe their finances are in good shape, but new data from the Federal Reserve suggests that confidence may be misplaced.

A closer look at the survey results offers a valuable reality check. It might prompt you to reassess how secure your finances really are and what steps you can take to improve them.

Only 51% of Americans are living within their means

One of the most striking findings from the survey is that only 51 percent of U.S. households reported spending less money than they earned in the past month. Another 30 percent said their spending matched their income. That leaves 19 percent who spent more than they brought in.

As concerning as that sounds, the 51 percent figure is an improvement from the previous year, when just 48 percent of households lived within their means. But even with that modest progress, the bigger picture remains troubling.

Spending exactly what you earn leaves no margin for error. One unexpected expense could push you into debt or force you to dip into savings. And for the 19 percent spending beyond their income, the situation is even more serious. They are either using up savings or relying on debt. Neither approach is sustainable over time.

Income plays a major role. While 66 percent of households earning over $100,000 said they were spending less than they earned, the national average is pulled down by those below that threshold. For households making under $50,000, fewer than 40 percent are living within their means.

How to close the gap

If your budget has no cushion for emergencies or future needs, it may be time for some tough decisions.

• Reevaluate your expenses. Somewhere along the way, spending has outpaced income. It is better to make changes now than to wait until circumstances force your hand.
• Find ways to earn more. Asking for a raise, switching jobs, or picking up extra work can be difficult, but the effort may provide the financial breathing room you need.

Perception versus reality

The Federal Reserve also found a disconnect between how people feel about their finances and what the numbers suggest.

According to the survey, 39 percent of respondents said they were “doing okay” financially. Another 34 percent said they were “living comfortably.”

That adds up to 73 percent who think they are in reasonably good shape. But if only 51 percent spend less than they earn, a significant portion may overestimate their financial health.

Access to credit can create the illusion of stability. As long as bills are being paid, some people assume they are managing, even if they are relying on borrowing. However, continued use of credit to cover basic expenses can lead to rising debt and declining credit scores. A weaker credit profile may limit access to affordable loans, housing, and other financial opportunities. This may help explain why household debt has continued to rise in recent years.

Time for a financial reality check

The risks are clear. Debt must eventually be repaid. As balances grow, interest costs rise, placing an even tighter squeeze on future budgets. To get a clearer picture of where you stand, consider asking yourself:

• When will you be able to stop borrowing?
• How will you repay the debt you already have?
• Can you afford future milestones such as buying a home, covering college costs, or retiring?

Answering these questions honestly may be uncomfortable, but it is a crucial first step toward getting back on track.

How households are falling short

The survey also uncovered other warning signs among U.S. households:

• Retirement savings are falling behind. Only 35 percent of respondents said they were on track with retirement savings. That means nearly two-thirds may be headed toward a reduced lifestyle later in life. Reviewing your retirement plan once a year and increasing contributions when possible can help you stay on track.
• Emergency savings are lacking. Just 55 percent of households said they had enough savings to cover three months of expenses. Among those earning less than $50,000, that number drops below 40 percent. Having emergency savings can protect you from needing to borrow in a crisis and can reduce the long-term financial impact of unexpected setbacks.
• Some homeowners are uninsured. Seven percent of homeowners reported having no homeowner’s insurance. This puts their most valuable asset at risk. If insurance feels unaffordable, it may be worth reassessing your housing situation to ensure it aligns with your financial reality.

Taking the first step toward stability

Stepping away from financial risk often requires difficult choices. But those choices are likely to be far easier than facing a future filled with mounting debt and uncertainty.

If you are struggling to find a way forward, consider reaching out for help. Nonprofit credit counselors, financial advisors, or trusted digital tools can help you assess your options and make a plan.

It is never too early to act, and recognizing the problem is often the most important step toward solving it.

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The post Only half of Americans spend less than they earn: Are you living beyond your means? appeared first on Credit Sesame.

Auto loan surge tied to tariff fears

The VantageScore CreditGauge reported that borrowing increased over the past year across all categories: auto loans, credit cards, mortgages and personal loans. Growth was strongest in the auto loan category. A VantageScore executive noted that “buyers appear to have accelerated their car purchases in anticipation of higher sticker prices due to the recently implemented tariffs.” Ironically, these accelerated purchases would have primarily benefited vehicle sales outside the US. In any case, the surge in auto loans has pushed borrowing in that category above pre-pandemic levels. See news release at VantageScore.com.

Americans feel stable but still wary of inflation

The Federal Reserve’s annual Survey of Household Economics and Decision-making found that 73% of adults described their financial situation as “okay” or “living comfortably.” This result was up slightly from the year before, but below the recent peak of 78% in 2021. Inflation remained the leading concern of consumers. 29% rated the national economy as “good” or “excellent.” That was up from 22% in 2023, but below the pre-pandemic level of 50%. Parents continue to face high childcare costs. Just over half of parents paying for childcare said it cost more than 50% of what they spend on housing. In light of those high childcare costs, 46% of parents of children under age 13 use unpaid childcare provided by someone other than the child’s parents, compared with 24% who use paid childcare. The newly released data come from a survey taken last October 2024, so the results reflect perceptions of the economy at that time. See report at FederalReserve.gov.

Confidence rebounds slightly in May 2025

The Conference Board’s Consumer Confidence Index had its first increase in May following five straight months of declines. The index rose by 14% in May, but remains well below where it was when the five-month slide started. The expectations component of the index remains depressed to a level that has traditionally been associated with recessions. The survey found that consumers are far more concerned about the affordability of wants and needs than job security. In terms of the impact of economic uncertainty on consumer behavior, 19% of respondents said they had made purchases sooner to get ahead of tariffs. On the other hand, 26% said they had cancelled or postponed major purchases. See news release at Conference-Board.org.

Credit scores predict overdraft risk

A Federal Reserve Bank of New York study found that low credit scores are the best predictor of whether bank customers are likely to overdraft their accounts. Only about 20% of bank customers ever overdraft their accounts. As has often been cited before, income level and ethnicity are related to the likelihood of overdrafts. However, when adjusted for credit scores, different income and ethnic groups tend to have roughly the same incidence of overdrafts. Variation in credit scores more closely predicts the probability of an overdraft. This probability is highest among people with credit scores below 620. That probability drops with each step up in credit score tier. People with scores below 620 are 50% more likely to have overdrafted a bank account than those with scores above 760. See report at NewYorkFed.org.

GDP revision confirms early 2025 slowdown

The Bureau of Economic Analysis put out a revised estimate that showed the economy shrank at an annual rate of 0.2% in the first quarter of 2025. That estimate is net of inflation and after seasonal adjustment. The decline of 0.2% marked a sharp reversal after a solid 2.4% growth rate in the fourth quarter of 2024. The latest estimate was the second of three planned official Gross Domestic Product estimates. See news release at BEA.gov.

Home prices up for third straight month

The latest update of the S&P CoreLogic Case-Shiller National Home Price Index showed that home prices rose by 0.76% in March. That was the third monthly increase in the index, after it declined overall in the second half of last year. Home prices have risen by 1.34% in 2025 and 3.37% over the past 12 months. See data at SPGlobal.com.

Mortgage rates keep climbing

30-year mortgage rates rose for a third consecutive week. They increased by three basis points over the past week to 6.89%. That’s their highest level since early February. 15-year mortgage rates also had a slight increase last week, rising by two basis points to 6.03%. Revived inflation fears have pushed mortgage rates substantially higher since their recent low point at the end of last September. See mortgage data at FreddieMac.com.

All weekly news headlines from Credit Sesame

• Last week’s news roundup May 24, 2025
• Next week’s news roundup June 7, 2025
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Technology and financial innovation are changing the way Americans handle money. Some of these changes provide consumers with more choices and better efficiency. However, some carry risks and additional costs.

The Federal Reserve Bank of Atlanta recently updated its annual Survey and Diary of Consumer Payment Choice. It tracks how Americans pay for goods and services, whether with cash, checks, credit cards or other methods. Looking at how these results have changed over time offers a clear view into the shifting landscape of consumer payments.

As new payment tools become more common, it is helpful to understand where they differ. Some come with added fees, slower processing or increased fraud risk, while others may offer speed or convenience.

How cash, debit, and credit card use have changed osince 2015

Cash is in decline, but far from dead

It’s probably no big surprise that cash is declining as a payment method. The surprising part may be that the vast majority of Americans still use it on some occasions. Cash was used for 14% of consumer financial transactions in 2024, down from 33% in 2015.

However, it’s not as if Americans have abandoned it altogether. The survey found that 83% of Americans had used cash within the past 30 days. That’s down from 87% a year earlier, but still represents over four out of five consumers.

Part of the decline in cash has been driven by the rise of online shopping and the growing prevalence of cashless venues for events like concerts and sporting events. In those cases, consumers don’t have the option of using cash. However, there are also positive reasons for moving away from cash, such as greater security, convenience and faster transactions.

Most people still find occasions to cash. Some of this may be prompted by the recent rise in surcharges on credit and debit card transactions. It pays to keep your options open.

Paper checks are fading fast

Americans have moved more decisively away from using paper checks. They represented just 2.5% of consumer payments last year, down from 6.5% in 2020.

But paper checks are not dead yet. They have a niche as a payment for large transactions. The average payment by paper check was $633 in 2024. The averages for cash, credit cards and debit cards were all under $100.

One thing that may discourage consumers from using checks is their vulnerability to fraud. Thieves often intercept checks in the mail, either when banks send checkbooks to customers or when people mail out payments themselves. “Check washing,” a process by which criminals change the information written on checks, has become a frequent problem. Also, modern photo editing software has made creating phony blank checks relatively easy.

If you still use checks, take steps to protect them. Avoid leaving outgoing checks in your mailbox for pickup. Instead, drop them in a secure mailbox or take them to the post office. If you order new checks, note the order date and contact your bank if they do not arrive within a reasonable timeframe.

Credit or debit? The battle for leadership

Credit cards are the leading method of payment used by Americans, followed by debit cards.

Debit card use has stayed steady over the past decade, accounting for 29.6% of transactions last year. That is nearly unchanged from the 29.5% share in 2015.

Over the same time, credit card usage has risen sharply. This has allowed credit cards to pass debit cards as the most frequent form of consumer payments. Credit cards represented just 18.3% of transactions in 2015, but this rose to 34.5% last year.

Some customers may prefer credit cards because they offer more fraud protection than debit cards. Also, credit cards are more likely to offer rewards. However, their growing use over the past ten years has coincided with a sharp rise in credit card debt. Some customers may prefer credit cards because they offer more fraud protection than debit cards. Credit cards are also more likely to offer rewards. However, their growing use over the past ten years has coincided with a sharp rise in credit card debt. Carrying a balance can lead to interest charges and late fees, and if payments are missed or maxed-out limits are common, it can also hurt your credit score.

According to the Federal Reserve Bank of New York, credit card debt has grown by 73% over those ten years. Allowing debt to accumulate like that is an expensive habit compared to paying with a debit card. With a debit card, you only spend money already in your bank account. So, there is no debt, no interest charges and no potential for late payment fees.

With credit cards, you borrow money whenever you use the card. You can escape interest charges if you pay the balance in full each month. However, many Americans don’t. This helps explain why credit card debt has risen as they’ve become a more popular alternative to debit cards.

Be wary of surcharges when paying bills

Whether you use a credit card or a debit card, watch out for surcharges. These fees are increasingly added to cover the vendor’s transaction processing fees.

While surcharges at restaurants get a lot of attention, they are even more common on certain types of bills. Government payments like taxes and fees often include surcharges, as do school, rent and utility payments. For these expenses, it may be worth using a different payment method, such as a bank transfer.

What consumer payment trends mean for your everyday finances

Payment methods will keep evolving, but the fundamentals stay the same. Know your options, weigh the risks, and choose the method that works best for your needs, not just what is most convenient. Understanding the pros and cons of each option can help you avoid fees, reduce risk, and stay in control of your finances.

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The post U.S. consumer payment trends: How do your spending habits compare? appeared first on Credit Sesame.