By Roy Urrico
Growth in consumer spending was modest in April, as were increases in credit and debit payments. Those were among the findings in the May 2024 edition of the Velera Payments Index, which also featured a “Deep Dive” into an overall food category, which included groceries and dining out, and provided additional context for inflationary impacts on non-discretionary spending.
St. Petersburg, Fla.-based Velera – formerly PSCU/Co-op Solutions – the nation’s premier payments CUSO and an integrated financial technology solutions provider – designed the Velera Payments Index to help credit unions make strategic, data-informed decisions on behalf of their members.
“As overall inflation continues trending downward, consumer spending growth remained at modest levels in April,” said Norm Patrick, vice president, Advisors Plus Consulting at Velera. “In this month’s Deep Dive into the overall food sector, we see grocery store spending maintaining the largest allocation of spend across both credit and debit. With stubbornly high grocery and restaurant prices remaining elevated, food costs continue to eat up the highest percentage of household budgets in more than 30 years.”
Economic Overview
The Velera Payments Index reported the Conference Board’s Consumer Confidence Index dropped in April (2024) to 97.0 from a downwardly revised March result of 103.1. While there have been three months of decline, the Index has maintained a relatively narrow window for the past two years. The University of Michigan Index of Consumer Sentiment decreased 10 points to 67.4 for May, following stable results since January within a 2.5-point range. The drop in sentiment spanned all age groups, income levels and education levels.
Job growth slowed more than economists expected in April with 175,000 jobs created – well below the March jobs number at 315,000. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate for April ticked up to 3.9%, or 6.5 million people. Job gains occurred in healthcare, social assistance and transportation and warehousing.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% in April, while the 12-month rate of inflation was 3.4%. Shelter and gasoline again contributed to more than 70% of the increase. Excluding the volatile energy and food sectors, the core CPI index increased 0.3% from March, putting the 12-month Core CPI index at 3.6%, the smallest increase since April 2021.
Cards
For April, growth rates were positive, but only up modestly year-over-year. Debit purchases were up 3.2% and credit purchases were up 1.1%. Debit transactions were up 2.7% and credit transactions were up 2.2% year-over-year.
Total credit card balances were up 6.7% compared to a year ago. Month over month, total balances decreased 0.4%. The average credit card balance measured $2,899 in April 2024, up $77 or 2.7% year-over-year, and down $9 or 0.29% from the previous month’s average.
In addition, the credit card delinquency rate continued to decline in April, finishing at 2.34%. The credit card delinquency rate continued to decline, finishing at 2.34% for April 2024. Compared to the previous month, the delinquency rate dropped 8 basis points, while the percentage of balances delinquent increased 53 basis points (up from 1.81%) year-over-year
The Velera Payments Index also reported as consumer spending remained modest, debit card growth continued to outpace credit card growth. In April 2024, debit purchase dollars increased 3.2% year over year, while transaction volumes were up 2.7%. Consumer spending on credit cards yielded year-over-year increases of 1.1% for purchases and 2.2% for transactions.
The money services and services sectors were the leading drivers of debit purchase growth, collectively contributing 2.8% of growth. For credit purchases, the services sector provided the greatest growth at 1.8%. The food and grocery sector negatively impacted both debit and credit purchases, driving growth down 0.6% and 0.3%, respectively.
Balance Transfers
In reviewing April 2024 results, the volume of balance transfer transactions was down by 18%. “For those that used balance transfers in April 2024, the average amount was $4,146, up 16% or $572, from 2023. Given rising credit card delinquency rates and liquidity challenges, this trend could be a warning sign for credit unions, as higher interest rates could also be leading to credit union members utilizing fewer offers,” suggested the report.
Velera reported a 37% drop in the volume of balance transfers for March 2024 compared to 2023 and reported that Velera’s Advisors Plus saw lower demand from credit unions in sending balance transfer offers by roughly 7.5%, coupled with offers sent later than in past years. “March is historically the peak month for balance transfer usage. In reviewing April 2024 results, Velera found the monthly balance transfer dollars more in line with prior-year months of April, down 4% year over year.
For April, total balance transfer dollars were more in line with seasonal changes, down 4% year over year. The typical seasonal peak in March was greatly reduced and may have spilled into April activity, with income tax filings due on April 15. The average amount of balance transfers was up 16%, or $572, at $4,146.
Deep Dive on Food
While there was positive growth in overall food purchases (up 1.8% for credit and up 2.5% for debit), consumers are spending slightly less on average in the grocery store and supermarkets segment, which represents the largest portion of overall food. The average credit purchase at supermarkets was $52.98, down 1.6% year to date compared to 2023. The average debit supermarket purchase was $52.09, down 0.5% for the same period.
For April 2024, the month’s Deep Dive section focused on the grouping of grocery stores/supermarkets, quick service restaurants (QSRs)/fast food and other dining, which represented 20% of overall credit purchases and 29% of overall debit purchases. While the overall food index was unchanged in April, the food at home index declined 0.2% and the food away from home index rose 0.3% for the month.
What Should Credit Unions Do Now?
The Velera Payments Index recommended steps for credit unions to take advantage of current trends:
Gauge your success. For your credit and debit portfolios, do you see similar growth rates and a comparable mix of transactions? Leverage Velera’s Member Insight, and other tools, to see how your credit union is performing.
Engage with your members. Your members are purchasing food and dining out, likely paying with a debit or credit card. Do you have accountholders with no or low usage in these food-related segments? Can a usage stimulation campaign motivate them to use your card when they are out dining?