RANCHO CUCAMONGA, Calif. – New analysis of card spend data by Co-op Solutions finds “spending is showing signs of cooling with consumers tightening their grips on their wallets.”
Overall, August Co-op credit union portfolio data shows that August transaction volume rose by 4.2% in credit and 0.4% in debit on a rolling 12-month basis, according to an analysis by the company’s SmartGrowth team.
The Findings
Here’s what Co-op Solution is reporting:
Education Spending Levels Up
“While seasonal back-to-school spending increases in August are no surprise, the longer-term spending trendwithin the Education merchant category is one of growth, as more students return to campus in the K-12, trade school and post-secondary settings”, according to Co-op.
The company reported its data show monthly transaction volume was up 74.5% in credit and 83.8% in debit in August, and grew by more than 15% in both portfolios for the rolling 12-month period.
Of note, said Co-op, was a huge increase in transactional volume for Elementary spend, indicating that the youngest students have returned to in-class instruction.
Travel Boom May Have Peaked
Co-op noted one of the biggest growth stories of the past year, travel spending has demonstrated consumers’ eagerness to return to domestic and international tourism after a couple of years on the sidelines.
On a rolling 12-month basis, Co-op credit union payment data from August shows the Travel category up 18.0% in credit and 6.9% in debit.
“However, monthly transaction volume declined slightly in August from July across both portfolios, likely due to the end of summer travel as schools are back in session,” Co-op reported.
In releasing its analysis, it cited a statement in the most recent Fed Beige Book, “Consumer spending on tourism was stronger than expected, surging during what most contacts considered the last stage of pent-up demand for leisure travel from the pandemic era.”
“At the same time, so-called ‘staycations’ have seemed to have lost their rustic charm,” Co-op continued. “The Camping & Campers category declined in August from the previous month across both the debit and credit portfolios, and is down a significant -8.1% in credit and -12.1% in debit over the past year.”
Rent Takes a Bigger Bite
“With the costs of purchasing (and financing) a new home rising over the past year, younger households – particularly prospective first-time homebuyers – are being left on the sidelines,” Co-op stated. “This in turn is causing rental demand to increase, driving up costs.”
According to Co-op’s spending data, transaction volume in the “Real Estate Agents and Managers – Rentals” merchant classification grew by 17% across the combined credit and debit portfolios over August 2022, while average transaction amounts increased by 4% over the same period.
Meanwhile, Co-op added, the Home Improvement category is down -3.6% on credit and -7.3% on debit over prior year, as is Furniture, down -13.0% and -15.4%, respectively, reflecting a tightening of household budgets.
“Homeowners are done with all the big-ticket renovations and remodels and are now looking just to maintain their current living spaces,” said John Patton, Co-op senior payments advisor.
Credit Growth Remains Strong, For Now
Year over year, Co-op reported credit transaction volume continues to maintain a “strong clip,” at 4.2% growth on a rolling 12-month basis compared with just 0.45% for debit.
“However, month over month Debit transaction volume rebounded in August (up 6.6%) compared to credit transaction volume (up just 2.0%), reinforcing the narrative that consumers are now overextended on credit debt (which exceeded $1 trillion for the first time in July), and watching their budgets much more tightly,” Co-op stated.
At the same time, the company said its analysis found credit balance consolidation activity declined significantly in August, falling nearly 25% following a big jump in July.
“This may indicate both a demand and supply issue, as rising rates are driving issuers to pull back on low interest offers, while consumers used to low rate or even 0% balance transfer offers are seeing less appeal in higher rate promotions,” Co-op added.
“While consumers embraced spending on Credit over the past year, it appears that the tide may be shifting,” said VP Beth Phillips. “They are becoming more cautious with their usage as interest rates continue to rise and their debt load increases.”
Per Co-op credit union portfolio data, Credit balances grew by 12.6% YoY (month of August 2022 vs. month of August 2023), the company said.
Electric Vehicles Jolt Upward
The new Co-op data show electric vehicle (EV) charging transaction volume has exploded over the past year, up 121% in credit and 139% in debit on a rolling 12-month basis, despite gross volumes still representing a small part of the overall automotive fueling market.
“It’s still early, but it’s clear the electric revolution is beginning to take hold,” Co-op said. “The share of electric vehicles as a percentage of total car sales was over 10 million in 2022, representing 14% of the total market. This figure is forecasted to rise to 14 million in 2023.”
What Credit Unions Should Do Now
According to Co-op, as the “leaves turn, members are increasingly focused on their personal financial picture. And some of them can use all the help their credit union can provide.”
The company is offering the following advice to credit unions:
- “With many consumers saddling high debt loads, now is the time for credit unions to promote their deposit products, including checking, savings and debit cards to help members reach their savings goals and pay off high-interest debt balances. And for those who are truly struggling to make ends meet, credit unions may want to offer debt consolidation services, or a skip-a-pay program to help them get ahead on their monthly obligations.”
- “For those who are continuing to spend, it’s a good time for credit unions to activate their loyalty rewards program as the holiday shopping season is just around the corner. Members should be incentivized to use their credit union’s card within the most popular retail and travel categories this Fall.”
Additional info can be found here.
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