Why Do We Spend the Way We Do? Unpacking U.S. Spending Habits
Authors: Rachel Szeto (Project Lead), Noah Kim, Brian Kim, Georgia Sherr
INTRODUCTION
Have you ever noticed that your spending habits change throughout the year? Maybe you splurge a little more during the holidays or tend to shop online late at night. From everyday essentials to big-ticket purchases, the way we spend is not random — it follows patterns influenced by seasons, platforms, and even psychological triggers.
In this article, we dive into U.S. transaction data to uncover the key factors shaping consumer spending. How does spending fluctuate over time? When do people prefer online vs. in-person shopping? What types of transactions lead to the biggest purchases? And which payment methods dominate different spending categories? By analyzing real consumer data, we provide insights that can help businesses understand their customers better and help individuals make more informed financial decisions.
Spending Fluctuations Over Time: Seasonal Trends and Monthly Changes
Consumer spending fluctuates throughout the year, shaped by holidays, travel, and retail trends. But when do people spend the most, and what patterns emerge month to month?
To begin, we examine overall spending patterns across different months to identify periods of high and low expenditures.
The Total Spending by Month and Season graph illustrates clear seasonal spending trends. Winter months, particularly January ($2.69M) and December, show some of the highest spending levels, likely due to post-holiday shopping and travel expenses. Spending in January is nearly 44% higher than in February ($1.87M), the lowest-spending month. Summer months also see spikes, aligning with increased travel and recreational activities. Conversely, spending dips in transitional months like April ($1.93M) and May ($1.48M) when there are fewer major holidays or shopping events.
Looking beyond individual months, a cumulative spending graph shows that even with month-to-month fluctuations, consumer spending is on a steady upward trajectory. Shopping dominates overall spending, making up over 85% of total monthly expenditures, but essential categories like housing, utilities, and travel contribute consistently. While total spending fluctuates throughout the year, breaking it down by category helps explain what drives these changes.
The Spending by Category graph highlights how different types of expenditures vary month to month. Fitness-related expenses peak in January, likely due to New Year’s resolutions, while travel spending surges in July and December, coinciding with peak vacation periods. In contrast, spending on medical and dental services remains steady, suggesting that essential health-related purchases are less affected by seasonal shifts.
A closer look at spending categories further reinforces this pattern. Shopping remains the dominant category, accounting for over 90% of total spending in peak months like March and January. Meanwhile, housing and utilities, fitness, medical/dental, and travel show minor fluctuations but remain relatively stable throughout the year. Unlike discretionary spending, these essential expenses contribute to a steady baseline of consumer activity.
Overall, spending follows a cycle: it spikes in winter and summer, slows in spring and early fall, and picks up again before the holidays. While shopping drives these peaks, essential expenses like housing and utilities provide a steady baseline of financial activity.
Online vs. In-Person Shopping: How Consumer Preferences Shift
Businesses have traditionally relied on brick-and-mortar transactions to sell products. However, as digital platforms continue to reshape the retail industry, companies must adapt to shifting consumer behaviors.
The following graph presents an overview of the frequency of purchases on three separate mediums: online, mobile app, and in-store.
At a glance, there does not seem to be one single platform that is significantly more popular than the others. Taking a closer look will reveal purchasing habits that vary across different shopping categories. Categories such as “Food” and “Fitness”, for instance, are dominated by mobile-app purchases, suggesting a growing trend of using mobile apps for convenience or faster checkout processes. Additionally, spenders prefer in-store transactions for gifts and groceries, possibly due to the need for physical inspection of these items. However, there are less intuitive results presented by this graph as well. The popularity of rideshare apps does not seem to translate to the “Transportation” category, nor do the plethora of subscription-based services available online make a mark on the “Subscriptions” category.
Category is not the only influence on consumers’ choice of platform. The above graph presents a comparative analysis of total purchases over a calendar year. Spikes around January and May indicate periods of high consumer activity, whereas February and the late summer months saw dips in spending. These patterns indicate that there is seasonal influence over purchase habits; for example, the strong peak in January may be the result of many post-holiday shopping sprees.
Overall, online purchases appear to be the most stable of the three, which could be attributed to the platform’s constant availability. On the other hand, mobile apps and in-store purchases show more volatility. The two platforms may both be influenced by time-limited promotions, flash sales, and external factors such as weather, public events, and ad campaigns.
Whatever the case, an understanding of the influences on consumers’ choice of platform can be an invaluable resource for businesses navigating the rapidly shifting landscape of digital shopping.
High Value Transactions
Consumer spending varies widely depending on the type of purchase, but some categories consistently account for higher-value transactions. By identifying which of these spending categories tend to involve larger purchases and whether they occur online or in-store, we can better understand purchasing behaviors of consumers.
To classify these high-value transactions, we set a threshold at the 80th percentile of total spending. This means only the top 20% of purchases by total spent are considered, allowing us to focus on the most significant transactions. Categories like housing/utilities, medical, and shopping, occur more frequently online. This trend suggests that consumers prefer digital platforms for larger, essential, or recurring expenses like rent or bills. Others, notably fitness and travel, have a more balanced distribution between online and in-store, suggesting that while consumers may book travel and memberships online, they also spend significantly in-store on items involving equipment or travel-related purchases.
Analyzing the spending variability for the top 3 categories with the highest likelihood of making high-value transactions reveals key spending patterns across different categories, particularly for in online versus in-store purchases.
Categories like housing and utilities show significant spending variations, with larger purchases occurring more frequently online, likely due to electrical or gas bill payments and subscription-based services. Fitness spending is also more evenly distributed between online and in-store, as equipment purchases are often online, and training sessions and gym memberships usually require in-person transactions. In the Shopping category, high-value transactions vary from large retail purchases to subscription-based spending. This spread in transaction values suggests that some consumers make expensive purchases like electronics or luxury goods, while others have ongoing high-value spending habits through online subscriptions. This broad range of spending behaviors in Shopping aligns with the observed high variability in transaction values, reinforcing the influence of personal preferences for regular shopping.
Payment Methods Across Categories
The Spending by Payment Method for Shopping graph provides insight into how people choose to pay for their purchases. Digital wallets and cash are the most popular payment methods, with spending reaching $7M and $6.7M, respectively. This shows that contactless payments are becoming increasingly common, as digital wallets offer a quick and secure way to shop.
Credit cards follow closely at $5.9M, indicating that many consumers still rely on them for rewards, installment payments, or larger purchases. Debit card spending is the lowest at $3M, suggesting that people tend to use debit for everyday essentials rather than discretionary shopping. These numbers reflect a growing shift toward mobile and digital payment solutions, which continue to reshape the retail landscape. However, cash remains a strong contender, likely due to small in-person transactions, local businesses, or consumers who primarily rely on cash. As digital payments continue to grow, credit and mobile transactions may eventually surpass cash spending.
CONCLUSION
Spending habits in the U.S. are shaped by a mix of seasonal trends, shopping platforms, high-value transactions, and payment preferences. While shopping drives the biggest fluctuations, essential expenses like housing and utilities provide a stable financial foundation. Where and how people shop depends on category, convenience, and external factors like promotions and holidays. Online shopping remains steady, while mobile app and in-store purchases fluctuate more throughout the year. Payment trends show that digital wallets and credit cards are gaining traction, yet cash still plays a significant role in shopping transactions. As retail and payment options continue to evolve, these insights provide valuable takeaways for both businesses adapting to shifting consumer behavior and individuals making informed financial choices.
What’s next? Whether you are a business owner looking to optimize sales or a shopper curious about your own habits, keeping an eye on these trends can help you make smarter spending decisions in an ever-changing economy.
