People are Financing Dinner

It's Friday, March sixth, and welcome to HigherIQ. According to an analysis from the Urban Institute, a quarter of American adults now pay for groceries with a credit card and carry the balance forward. And the number of people using buy now, pay later apps for food has nearly doubled in the past year. DoorDash partnered with Klarna so you can finance your delivery burrito in four installments. If that sounds like a punchline, it's not. It's the clearest signal we have about where the American consumer actually is right now, and today we're going to follow that signal all the way through the economy, because it explains something bigger: why the brands in the middle of the market are disappearing, and why the stores you grew up with are being replaced by either Aldi or Hermes with very little in between. Food prices in the U.S. have risen about twenty-four percent since 2020, according to Bureau of Labor Statistics data. Wages have grown, but not enough to close the gap, especially for lower-income households where groceries now eat up nearly a third of take-home pay. The headline inflation number has cooled, which makes it sound like the problem is over. But cooling inflation doesn't mean prices went down. It means they stopped going up as fast. The grocery bill from 2024 is still the grocery bill in 2026, and for a lot of families, that bill is now going on a credit card. The Urban Institute found that one in four adults used a credit card for groceries and didn't pay the balance in full. Another nineteen percent dipped into savings they hadn't planned to touch. And the fastest-growing category is buy now, pay later: twenty-five percent of BNPL users now use the service for groceries, up from fourteen percent a year earlier, according to LendingTree. These aren't people buying luxury goods on installment plans. They're splitting a grocery run into four payments because the alternative is overdrawing their checking account. Credit card APRs are averaging above twenty-eight percent right now. Which means a two-hundred-dollar grocery trip that gets carried on a card can quietly become two-fifty or three hundred over a few months. Personal finance commentator George Kamel called the DoorDash-Klarna partnership exactly what it is: "If you have to finance your DoorDash with Klarna, that's not convenience. That's a crisis." The snowball effect is real. You're still paying off last month's milk and eggs when this month's bill hits. And BNPL creates its own trap. Analysts call it "loan stacking": you split your grocery run on Tuesday, your headphones on Wednesday, your shoes on Friday, and suddenly you've got three overlapping payment plans, none of which show up on a traditional credit report. Forty-one percent of BNPL users told LendingTree they've made a late payment in the past year, up from thirty-four percent the year before. The product was designed for handbags and electronics. Now it's being used for eggs and milk, and the people using it are the ones least equipped to absorb the late fees. A survey from Credit One Bank, which is worth noting surveyed its own customer base so the numbers likely skew toward people already using credit, found that fifty-four percent said groceries and essentials had the biggest impact on their finances over the past year. Not rent, not healthcare, not transportation. Groceries. Twenty-eight percent said their credit card balance grew in 2025, double the number who said it shrank. And the stress isn't evenly distributed. Thirty-six percent of women said they feel worse about their financial situation compared to last year, versus twenty-six percent of men. The survey doesn't explain the gap, though it may be connected to the fact that women still handle the majority of household grocery shopping and confront the prices more directly. Gen Z is the most pessimistic generation in the data: only seven percent expect their household income to increase this year. Meanwhile, a survey from The Century Foundation, a progressive policy organization, found that one in three Americans skipped a meal in the past year, up from one in four just months earlier. Working-class Americans are twice as likely to skip meals and medication, fall behind on bills, and rely on payday loans compared to their college-educated peers. Two-thirds of Americans entered 2026 already carrying debt. And sixty-two percent of households earning under fifty thousand dollars a year report having no emergency savings at all, which means a single unexpected expense, a car repair, a medical bill, can push someone from "managing" to "drowning" overnight. This is not a recession. Unemployment is low, GDP is positive, and consumer spending in aggregate still looks fine. But aggregate numbers hide the split. The top is spending more. The bottom is financing dinner. And this split is reshaping the entire consumer economy. Private-label grocery brands, the store-brand alternatives, are projected to grow fifteen percent this year as shoppers trade down from name brands. Aldi, the German discount grocer, is expanding aggressively across the U.S. Dollar General added a thousand stores in a single year. At the other end, luxury sales keep climbing. Hermes raised prices fifteen percent in January and saw demand increase. Premium beauty and skincare are booming as younger affluent consumers shift spending from handbags to high-end serums. Both ends of the market are thriving. The middle is collapsing. This is showing up most visibly in retail. The companies caught in between, too expensive to compete with Walmart and Aldi, not aspirational enough to compete with luxury, are losing customers in both directions. Target has struggled to compete with Walmart on groceries while lacking the prestige draw of premium brands. Kering, which owns Gucci, saw sales drop twenty-four percent in key regions. Department stores, which were built for the mid-market shopper, have vacancy rates forty percent higher than either luxury malls or outlet centers. Gap, Bed Bath and Beyond, J.Crew: the list of mid-tier brands that have closed stores, filed for bankruptcy, or fought for survival keeps growing. The dynamic is the same in restaurants. Casual dining chains like Applebee's, Chili's, and TGI Fridays are caught between fast-casual options like Chipotle that offer better food at a lower price and fine dining that offers an experience worth the splurge. In fashion, luxury prices have risen sixty-one percent on average between 2019 and 2025, which has pushed a lot of aspirational shoppers out of the luxury tier and into a weird no-man's land where they can't afford the real thing but don't want the cheap version either. H&M and Bershka are cutting their cheapest SKUs and moving upmarket because they can't compete with Shein on price but can't afford to be seen as disposable either. The middle of every category is getting hollowed out. And the shift isn't just happening in stores. A PwC survey found that sixty-two percent of consumers switched to cheaper brands in at least one category, while twenty-two percent traded up to luxury. The middle lost share to both ends simultaneously. When consumers do splurge, they're increasingly choosing premium beauty and skincare over mid-range fashion, because a seventy-dollar serum feels more justifiable than a seventy-dollar sweater. The purchase has to either save you money or feel like an event. Anything in between is harder to justify. McKinsey's State of Fashion 2026 report, co-published with Business of Fashion, specifically flags this dynamic: brands in the middle are being forced to pick a side, lean premium or lean value, because straddling both is no longer viable. It's a story about what persistent inflation does to consumer psychology over time. Prices went up twenty-four percent in four years. Wages didn't keep up for most people. So people didn't just temporarily trade down. They permanently recalibrated what they're willing to pay for, and what they're not. The "good enough at a reasonable price" proposition that built the American middle-class brand doesn't work when reasonable is no longer affordable and good enough is no longer good enough. If you've noticed that your favorite mid-priced restaurant feels emptier, or that the department store near you has more vacant storefronts, or that you're buying more store-brand groceries than you used to, you're not imagining it. You're living inside a structural shift in how the consumer economy works. The middle isn't coming back, because the conditions that created it, a broad middle class with enough discretionary income to buy brands that were neither cheap nor expensive, are eroding. What's replacing it is a market that serves two customers: the one who can afford not to think about price, and the one who can't afford not to. A quarter of Americans are carrying grocery debt on their credit cards. DoorDash lets you finance a burrito. And the brands built for the middle-class shopper are disappearing because the middle-class shopper is making different choices now, not because they want to, but because twenty-four percent inflation over four years leaves you with two options: find the cheapest version or decide it's worth the splurge. The middle used to be where most of us lived. Increasingly, it's where nobody shops. Stay informed, stay curious, and we'll see you tomorrow.