ST. PETERSBURG, Fla.— Growth in consumer spending increased on debit but softened on credit during August, Velera reported, citing lower gasoline prices as the reason for the shift.
“In this month’s Deep Dive, back-to-school spending revealed growth in discount and department stores, digital merchants and wholesale clubs, as consumers look to continue stretching their dollars as they battle inflation. While consumer spending on credit softened in August, credit card balances continue to rise,” said Tom Bennett, principal, Consulting at Velera. “As the holiday shopping season approaches, now is the time for credit unions to prepare for supporting increased member credit usage. Developing campaigns to launch in the new year and planning ahead for managing the seasonal rise in delinquencies are timely strategies to consider."
Key takeaways from the September edition of the Velera Payments Index:
- 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,” Velera stated. “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, Velera said.
- 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.
The full report is available for download here.