CU Member Spending Up; Potential Bigger Reliance on Credit Coming Soon

CO-OP Financial Services reported Monday that credit union members’ spending continued to climb toward pre-pandemic levels in the first two weeks of July, but warned those gains could be reversed with federal unemployment benefits set to expire later this week.

According to the new report, transaction volume within CO-OP’s debit portfolio was nearly identical to the same period last year, as the dollar amount of those transactions increased 17%.

The shift to debit was accompanied by declining credit card transaction volume, which was down 8% from last year. However, CO-OP said the trend may not last, given uncertainty surrounding federal coronavirus relief packages.

“The shift to debit was to be expected as more Americans went back to work and more states continued easing business restrictions; however with the additional $600 per week unemployment payouts under the CARES Act set to expire this week, we may see a shift back to reliance on credit,” CO-OP said in a statement Monday.

According to CO-OP spending levels in the online bookstore segment were up, with Amazon driving 32% and 48% increases in debit and credit purchases, respectively. Hardware stores also saw an increase in transaction activity, with debit spending up 25% and credit spending increasing 16%.

But other sectors that were harder-hit by the coronavirus pandemic showed precipitous declines in transaction activity compared to July 2019.

Spending on airline travel was the most affected, sinking more than 50% compared to last year (50% for debit and 69% for credit transactions). Barbers, beauty shops and spas were also down 24% in debit transactions and 35% in credit, CO-OP said.

The report found that those services “began opening up in many states in June but it appears most members are holding off on that post-pandemic haircut (or perhaps continuing to do it themselves).”

“This may change over the coming months as more businesses begin to implement safety precautions and procedures to put their customers at ease,” CO-OP said.