By: Velera 

In the September edition of the Velera Payments Index, we see that growth in consumer spending increased on debit but softened on credit, mainly due to lower gasoline prices. We also present a Deep Dive on Back-to-School spending activity. A National Retail Federation (NRF) survey finds that more than half (55%) of shoppers started back-to-school purchases in July. 

Consumers continued to express concerns about the labor market, despite the Consumer Confidence Index ticking up in August and the University of Michigan Index of Consumer Sentiment increasing slightly. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate for August was slightly lower by 0.1 percentage point to 4.2%, or 7.1 million people. Jobs increased by 142,000, with gains occurring in construction and healthcare. 

Key Takeaways

Key takeaways from the September 2024 edition of the Payments Index include:

• For August, year-over-year growth rates accelerated for debit but remained somewhat flat for credit. Debit purchases were up 6.2%, with almost one third of the growth coming from Money Services (CashApp, Venmo, Zelle, etc.). Credit purchases were down 0.8%, with most of the reduction coming from the Gasoline sector (-0.6%). Debit transactions were up 4.2% and credit transactions were up 1.3% year over year.
   
• The Consumer Price Index (CPI-U) declined in August, bringing the 12-month rate of inflation to 2.5% – the lowest point in the past three years. Shelter, which rose 0.5 percent in August, accounted for the majority of the monthly increase, while energy contributed to the largest decrease, down 0.8 percent. 
   
• Purchase growth for our “expanded” group of back-to-school merchant categories generally aligned with the growth in overall credit and debit card results. Year-over-year growth in debit purchases was up 7.5% and growth in back-to-school credit purchases was up 1.7%, fueled by growth with digital merchants, discount and department stores, and wholesale clubs as consumers look to continue stretching their dollars as they battle inflation. Purchase growth in more specialized merchant categories, like sports apparel, electronics and office supplies, was much lower year over year.
   
• The August delinquency rate was down 6 basis points compared to July 2024, but up 36 basis points compared to August 2023. Despite the monthly improvement, the credit card delinquency rate in 2024 remains elevated compared to the past few years, as well as when compared to the pre-pandemic patterns of 2019.
   
• Growth in year-over-year total credit card balances was up 4.2% for August. While total balances continue to increase, the rate of growth is slowing, with August marking the low point for 2024 thus far.

Checking In

We continue to monitor the following merchant category as we are in a presidential election year: 

• Political Organizations — The presidential election cycle remains front and center, with an increase of advertising following the presidential debate on Sept. 10. The advertising barrage will continue with hundreds of millions of dollars being spent on social media, television and radio ads up until the election. Year over year, growth in August 2024 was down compared to August 2020, with credit purchases down 10.8% and debit purchases down 14.1% compared to the same population in 2020. However, as seen in the 2020 election cycle, we expect the volume of transactions and purchases to increase until November. We will continue to monitor this merchant category through the election cycle.

What Should Credit Unions Do Now? 

• Credit unions should look to launch holiday card marketing communications as holiday spending begins in October. To ensure card-of-choice designation, promote awareness of card features and benefits, as well as implement targeted card usage strategies. 
   
• Peak usage for balance transfer checks occurs each March, so a post-holiday Balance Transfer campaign is an essential card marketing strategy. For example, Velera Consulting post-holiday transfer campaigns showed an average responder rate of over $6,500. Now is the time to begin planning a marketing campaign. 
   
• During the holiday season, credit card delinquencies remain elevated and tend to rise. Consider resources to assist or supplement your credit union’s collection activities, such as Velera’s TriVerity, which offers a variety of first and third-party services. 

Looking Ahead

The Federal Open Market Committee (FOMC) met from Sept. 17-18. At the conclusion of their meeting, the Fed announced that interest rates will be decreasing by 0.50% starting Sept. 18. This half-point reduction is the first time interest rates have decreased in four years. The post-meeting statement said, “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

We strive to provide valuable insights from the Velera Payments Index for our credit unions. We hope our credit unions are able to make informed and strategic decisions about the latest trends in consumer sentiment and payment preferences in order to best serve their members.