By Roy Urrico
Consumer sentiment started weakening in February 2025 over concerns of anticipated inflation increases. While growth in purchasing activity remained positive, February year-over-year results softened for both credit and debit transactions. These are among the findings in the March 2025 edition of the Velera Payments Index. The report also featured a “Deep Dive” on credit card delinquency rates.
St. Petersburg, Fla.-based Velera – formerly PSCU/Co-op Solutions – which describes itself as the nation’s premier payments CUSO and an integrated financial technology solutions provider, designed the Velera Payments Index to help credit unions and other financial institutions make strategic, data-informed decisions on behalf of their members and customers.
“As credit card delinquencies continue to rise, albeit at a slower pace than in previous years, credit unions must proactively support members facing financial hardship,” said David Knowles, SVP, collections and disputes and president, TriVerity at Velera. “With serious delinquency rates projected to reach 2.76% by the end of 2025 – driven by inflation, interest rates and ongoing economic uncertainty – credit unions should also consider the growing impact of buy now, pay later (BNPL) services, particularly among the youngest generations. By offering financial education, flexible repayment options and early intervention strategies, credit unions can help members manage debt responsibly and avoid deeper financial distress.”
Checking the Economic Indicators
The Consumer Confidence Index posted a sharp decline in February of 7.0 points to 98.3 (1985=100) and remains at the bottom range of monthly scores since 2022. “Consumers’ view of the existing labor market and future business environment has weakened and they are less optimistic about future income,” said the Velera Payments Index. Also reported was the University of Michigan Index of Consumer Sentiment, which fell in February by 10% to 64.7.
In the U.S. Department of Labor’s March 12th update, the Consumer Price Index (CPI) increased 0.2% in February, bringing the cumulative 12-month rate of inflation down to 2.8%. The shelter index accounted for nearly half of the February increase. Offsetting this increase was a 4.0% decrease in airline fares and a 1.0% decrease in the gasoline index. Core CPI, which excludes the food and energy sectors, increased by 0.2% in February, bringing the 12-month Core CPI to 3.1%. Increases were seen in medical care, used cars and trucks, household furnishings and operations, and recreation. Decreases were seen in airline fares and new vehicles.
In February, jobs grew by 151,000, with increases in healthcare, financial activities, transportation and warehousing, and social assistance. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate increased slightly for February to 4.1%, or 7.1 million people.
Key February Takeaways
Growth rates softened for credit and debit in February. On an adjusted basis (to account for the leap year in 2024), credit purchases were up 0.5% and debit purchases were up 5.7%. Credit transactions were up 0.7% and debit transactions were up 2.3%. Unadjusted (with one extra day in February 2024), credit purchases were down 3.4% and debit purchases were up 1.4%.Money services maintained their position as the top contributor to growth in debit purchases, accounting for one-third of the year-over-year increase. The goods and services sectors represented the second- and third-largest impact for debit, respectively. For credit purchases, the services sector was the largest growth contributor or February. Within services, insurance sales/premiums were the top merchant category.
Deep Dive: Delinquencies
Delinquencies rose after bottoming out in May 2021 at 1.03%, but have remained stable since February 2024. Overall credit card delinquencies for February 2025 were 2.49%, down 0.11% year-over-year. “However, we also saw higher delinquency rates within the younger age demographics, as seen in the notable increase for the youngest generational segment (Gen Alpha), up 17% year-over-year to 4.96% for February 2025,” said the Velera Payments Index.
The overall credit card delinquency rate represented a “modest” improvement from 2.67% for January 2024 and, according the Deep Dive, is “reflective of generally stable delinquency rates observed for the last 13 months.”
“While the year-over-year change in delinquencies was down 0.11%, there was an increase for the prime credit score grouping (credit scores between 660 and 759), up 0.10 percentage points to 0.99% in February 2025,” reported the Velera Payments Index. The largest movement came from the subprime consumer group (credit scores less than 660), which was 9.41% in February, down 1.01 percentage points since the start of 2024.
When looking at delinquency rates by generation over time, the delinquency rates are generally lower as the population ages. “The Boomer+ (oldest) population had the lowest delinquency rate for February 2025 at 1.69%, while Gen Alpha (youngest) had the highest rate at 4.96%, up from 4.17% (79 basis points) in February 2024.”
BNPL and Gen Alpha
As a follow-up to its BNPL Deep Dive in the February 2025 edition of the Payments Index, Velera analyzed credit card payment performance to better understand the importance of BNPL activity and credit performance within Gen Alpha.
For this cohort, according to Velera, the average credit utilization was 60.7%, with 73.1% paying less than the statement balance and 6.2% paying after the due date. Within Gen Alpha, more than half of BNPL participants (55.2%) make one to two payments monthly, totaling under $75. Over 18% of BNPL participants make more than six payments per month and represent 50.5% and 43.1% of transactions and payments, respectively.
What Should Credit Unions Do Now?
According to the Velera Payments Index, credit unions should:
· Enhance delinquency management tactics. Leverage advanced technologies and multi-channel communications options to engage cardholders in their preferred channels.
· Revisit fraud strategies with an omnichannel perspective. Before an attack happens is the best time to evaluate whether your fraud and risk mitigation portfolio is keeping pace with the expanding fraud landscape.
· Plan for summertime card marketing campaigns.
· Increase promotion of financial literacy, specifically for younger members, given the observed higher delinquency rates and propensity for utilizing BNPL.