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Booming luxury travel and a jump in ‘relief’ loans


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At American Express, consumers are continuing to open high-fee credit cards and splurge on luxuries like travel. But for lending firm Upstart, there’s a strong interest in microloans as cash-strapped Americans try to scrape by.

That juxtaposition underscores the growing picture of bifurcation among income brackets in America. And adds to an increasingly popular view that the U.S. is experiencing a “K”-shaped recovery since the end of the pandemic, where higher income classes reap the most benefits and lower-income Americans tread water or fall behind.

It’s led to a confusing picture of the U.S. economy that can impact everything from how the Federal Reserve will move interest rates next to who Americans will vote for in November. On top of this, some are worried it will threaten the surprisingly resilient economy that has been a worldwide marvel. And it comes at a unique moment with consumers once against leaning on debt and many beginning to crack.

“Our consumers are doing really well,” American Express CFO Christophe Le Caillec told CNBC last month, citing spending on flights and dinning out. “They’re enjoying life for sure.”

American Express’ typical consumer is affluent and is showing every sign that they are chugging along in the face of stubborn inflation and lingering economic uncertainty. More than 3 million new credit cards — which sometimes carry annual fees costing up to hundreds of dollars — were issued in the latest quarter. U.S. cardholders as a whole spent 8% more in the most recent three-month period.

First-quarter airline spending on American Express cards climbed 9% from the prior quarter, underscoring a continued willingness to pay for experiences. First-class travel has exhibited special strength, though management noted that can be tied in part to a resurgence of business trips. That too may be a good sign for white-collar workers as it shows businesses are willing to spend on travel again.

But behavior among some Upstart customers paints a different picture of the same economy. The company on Tuesday reported an 80% surge in originations of loans of up to $2,500 during the first quarter. These “relief loans,” as management describes them, have been used for expenses like rent and other regular bills, according to principal product manager Blair Lanier.

People taking these loans are more likely to be lower-income with no more than a high school diploma, Lanier said. Some may be turning to these small loans after being rejected for larger sums or by other lenders, but Upstart has also made changes to its automatic approval processes, the company said. (These loans are fixed-fee products with an annual percentage rate up to 36%.)

“The last two years have been a very sort of unique and specific and unusual event in the macroeconomy,” Lanier said. “I’m not that surprised that there is both significant existing demand for a product like this and that that demand would be visible right now.”

Struggling lower tier

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Booming luxury travel and a jump in ‘relief’ loans

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