RANCHO CUCAMONGA, Calif.–Credit union credit and debit card portfolios were generally flat to declining month-over-month in September, Co-op Solutions is reporting. The CUSO also noted that the shift to credit spending is slowing.
According to Co-op, the Campers & Camping and Sport/Recreation categories were particularly hard hit during September, with Entertainment (movie theaters, tourist attractions, museums, etc.), Lodging, Auto Rental, Airlines and Retail also showing moderate declines.
“No need to hit the panic button yet, as categories displaying small to moderate declines are in line with prior years’ month-over-month trends from August to September as transaction counts tend to decline as summer travel ends, back-to-school shopping declines, and consumers start pulling back spend in preparation for the holidays,” Co-op stated.
Among some of the key spending trends Co-op’s SmartGrowth consulting team said it is following:
#1: Early Holiday Shopping Begins Now
The combination of continued supply chain issues and rising inflation is pushing the holiday shopping season up in the calendar cycle, Co-op Solutions said.
Major retailers including Amazon, Target and Kohl’s are all promoting major sales in October, as a way to manage supply concerns and ensure they hit their holiday sales targets amid significant uncertainty.
“With inflation at the top of consumers’ minds, we anticipate many will do their holiday shopping a bit earlier and put their gifts away in their closets for a few months,” said John Patton, senior payments advisor, for Co-op. “I do think that retailers are doing a better job of managing their stock levels than they did a few months ago. They are better prepared.”
#2: Entertainment, Travel Spending are Softening
While the Entertainment and Travel spending categories have shown strong increases throughout the year, as inflation has continued its sharp rise, consumers have begun pulling back on such discretionary spending, according to Co-op.
“Year over year, the Entertainment category is up a massive 40% in debit and nearly 62% in credit. Travel spending has shown similar growth of 18% in debit and nearly 50% in credit. But in September, Entertainment fell in both debit and credit by 11%, while Travel was down a few percentage points, led by double-digit declines in debit spending on Lodging,” Co-op said.
#3: Shift to Credit is Slowing Down
Over the past year there has been a broad shift in spending from debit to credit, Co-op said, noting credit is up by 12.4% year over year, while debit has remained virtually flat over the same period.
But in recent months that narrative has begun to change. In September, debit was down by 4.0% and credit was down by 3.6% month over month. According to Co-op, households are “carefully choosing” to use debit or credit based on the context of the individual purchase and their own financial circumstances.
“Part of the reason why credit transaction volume is so inflated over the past year is that consumers are using credit more for everyday purchases,” says Beth Phillips, director, Co-op Solutions. “Consumers have traditionally used debit for such purchases, so a relatively small increase in such usage on the credit side can have an outsized impact on the relative percentage change.”
Month-Over-Month Category-Level Spending (Comparing September 2022 to August 2022)
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