The Velera Payments Index September 2024: A Deep Dive into Back- to-School Shopping

Our September 2024 edition of the Velera Payments Index shows that growth in consumer spending increased on debit but softened on credit, mainly due to lower gasoline prices. At the same time, consumers wait with great anticipation of the expected interest rate cuts by the Federal Reserve on Sept. 18. In this edition, we also share a Deep Dive into 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.

Key takeaways 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.
• 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. 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.

What should credit unions do now?

• As holiday spending begins in October, credit unions should look to launch holiday card marketing communications. Promoting awareness of card features and benefits, as well as implementing targeted card usage strategies are vital to ensuring card-of-choice designation. 
• A post-holiday Balance Transfer campaign is an essential credit card marketing strategy. As an example, Velera Consulting post-holiday transfer campaigns showed an average responder amount over $6,500. Now is the time to begin planning a marketing campaign, as peak usage for balance transfer checks occurs each March.
• As credit card delinquencies remain elevated and tend to rise during the holiday season, consider resources to assist or supplement your credit union’s collection activities.

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