RANCHO CUCAMONGA, Calif. –A drop in surplus cash is translating into a slight increase in spending on consumer credit, while the migration from debit to credit is intensifying, according to new analysis from Co-op Solutions.
Overall, Co-op credit union spending data shows that June year over year transaction volume rose by 4.6% in credit while falling by -4.5% in debit.
Online Discount Days Have Effect
Co-op noted that among the biggest headlines in July was Amazon’s record-breaking Prime Day, which saw shoppers worldwide purchase more than 375 million items on the first day of the sale, a notable jump from 2022’s 300 million items sold.
According to Adobe Analytics, the July 12-13 event drove U.S. online sales up by 6.1% for the 48-hour period. “Not to be outdone, Amazon’s biggest retail competitor scheduled its Walmart Plus Week to coincide with Prime Day. Target and Best Buy held their own July sales events, as well,” Co-op stated.
The company added that according to its credit union payment data for July, these special online sales events helped drive transaction volume in the Amazon/Bookstores merchant category up by 30.4% in credit and 60.6% in debit year over year.
‘Barbenheimer’ and Taylor Swift ‘Tantalize’
“It seems that tentpole movies are back,” Co-op said of the movies Barbie and Oppenheimer. “Blockbusters took a massive hit during the pandemic, as theaters were shuttered and the practice of releasing films simultaneously on the big screen and on streaming platforms became commonplace. But that all changed this summer, as the Barbenheimer phenomenon took hold with support from ubiquitous social media memes, a massive advertising push and generally positive reviews…,” Co-op said.
Meanwhile, consumers have also returned to live concerts and events this season, as highlighted by the success of Taylor Swift’s Eras concert tour. The pop singer’s appearances have reportedly boosted local economies nationwide, with one research firm estimating that the tour may end up generating up to $5 billion in economic impact – higher than the GDP of many countries, Co-op said.
“American households have returned in force to live and in-person events this summer,” said John Patton, Co-op senior payments advisor. “This is a positive sign that the consumer is feeling optimistic about the economy and their own personal financial position as we move into the fall.”
According to Co-op’s credit union data, transaction volume within the Movie Theaters merchant category was up 16.5% in credit, and 7.1% in debit year over year in July. Overall, the Dining & Entertainment category was up 5.7% in credit and down -2.8% in debit for the period.
Massive Jackpot Drives Lottery Spending
“With the Powerball lottery jackpot climbing to $1 billion in mid-July, it’s no surprise that the Government Lottery Tickets merchant classification code showed a strong increase in transaction volume,” said Co-op. “Although a single winner in California selected the winning numbers on July 19, the category still jumped up by 22.4% in credit and 13.0% in debit from June. It’s important to note that don’t allow consumers to purchase lottery tickets on debit and/or credit cards..
Migration from Debit to Credit Intensifies
Co-op reported that the year-long trend of consumers’ spending preferences shifting from debit to credit continued in July. Credit transaction volume rose 3.4% month over month versus June, while debit volumes declined by -3.4%.
“If you look at debit and credit transaction volumes overall, credit spending is on an upward trajectory while debit is headed down or basically flat,” said Beth Phillips, director, Co-op Solutions. “Consumers’ spending habits are shifting from debit and toward credit, with the shift from debit to credit highlighted most when it comes to recurring monthly expenses such as utilities and subscriptions.”
“Some of the categories like auto, movies, sports, grocery suggest that consumers are lightly transitioning to credit due to the cash in hand is depleting finally,” said Patton. “It's not a big move but the data confirms more consumers are transitioning to credit from debit.”
According to Co-op credit union payment data, Subscription Services was down -2.8% in credit year over year in July, but down a larger -11.8% in debit for the same period. In Utilities, credit transaction volume was up 2.2% on credit, but down a significant -6.6% on debit.
Year-Over-Year Category Level Spending (Rolling Year Average, and Comparing July 2022 to July 2023)
Additional information can be found here.
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