It’s the most wonderful time of the year for retailers as Americans start to gear up for the holiday season by increasing their credit and debit card payments to purchase gifts, food and trips ahead of the Thanksgiving and Christmas holidays.
But while purchasing that new video game console or paying for a family holiday can quickly put a financial strain on many households budgets, that strain could be amplified this season by high gas prices that won’t be coming down anytime soon.
And it’s not only gas prices. Heating oil costs are also surging, leaving U.S. households, especially in the Northeast, under even more pressure.
However, despite those headwinds, the U.S. consumer has remained resilient, and analysts at Bank of America are seeing stronger than expected spending growth across all income levels heading into the winter season.
September consumer spending shows strength
Using data from its retail banking operations, analysts at Bank of America recorded ¨solid¨ consumer spending in September with aggregated credit and debit card spending rising 6.2% year over year.
While increased fuel spending is driving some of that increase, BofA says its customers still spent 5.1% more year over year excluding gasoline. Those figures represent the third strongest growth the bank has recorded over the past four years. But perhaps most surprisingly, that growth is being spread across multiple categories.
¨One striking thing about recent card spending, in our view, is that it is well balanced across categories. For example, both spending on retail (excluding gasoline) and services grew strongly YoY in September, at 3.5% and 5.4%, respectively. Meanwhile, retail spending is showing notably better momentum than in 2025,¨BofA analysts led by David Tinsley said in a note shared with TheStreet.
Discretionary and necessary spending both rise
The analysts split the spending into two categories: ¨nice to have,¨ or discretionary and ¨need to have,¨or necessity.
They break those categories down even further into a spectrum.
- More discretionary – furniture, electronics, building materials, online retailers, clothing and miscellaneous stores
- Partly discretionary – auto, health and personal care, general merchandise
- Mostly necessity – gas and groceries
And through their checks, the analysts see growth across the entire spectrum of spending.
¨Even within these categories the edges will be blurred, but the overall impression is that retail spending growth is widely distributed, with spending rising across all fronts. One caveat:’mostly discretionary’ spending has been making a smaller contribution since June,¨analysts said.
Spending increase fueled by lower-income households
One might expect lower-income households to be the most burdened by increased gas prices, but they are actually the ones driving much of the growth Bank of America has recorded.
Lower-income household spending grew 5.5% year over year in September, outpacing the 4.9% growth and 4.8% growth from middle- and high-income households, respectively.
However, lower income spending could not keep up with the top 5% of households, which increased their card spending by 5.9% last month.
¨Overall, the divergences across income cohorts are much smaller than they were in 2025 and the first three months of this year. Just focusing on spending excluding key necessities (gasoline, food and utilities) doesn’t meaningfully change the picture of convergence across income cohorts,¨analysts said.
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¨The strength in lower- and middle-income households’ discretionary spending is occurring despite necessity spending shifting from a tailwind to a headwind over the past year amid rising gas prices (Exhibit 9). In our view, a key component of why these households have been able to combine rising necessity spending with strength in discretionary is the labor market and a recovery in their after-tax wage growth.¨