Credit Union Members Keep a Light Touch on Credit Cards

Credit union members continued to rely more heavily on their debit cards as the new year began, with credit card spending showing a gain even as balances have been declining.

The PSCU Transaction Trends Update found debit card spending in the week ending Jan. 3 was 16.4% greater than in Week 1 a year ago, which ended Jan. 5, 2020. Credit card spending rose 1.9%.

Economists have said consumer spending was buoyed after Congress passed relief in April that included $1,200-per-person stimulus checks and a $600-per-week federal bonus in unemployment payments that lasted through the end of July.

Savings generally increase in a recession — a trend reflected in credit union data published by CUNA for the recession that was triggered after COVID-19 was declared a pandemic March 11.

From March 31, 2019 to March 31, 2020, savings per member rose 4.4% to $11,306. By the end of April, savings per member were $11,804, up 10% from a year earlier. The latest data showed savings per member was $12,553 as of Nov. 30, up 14.3%.

The pandemic caused a significant shift in spending patterns, according to a report Monday from another payments CUSO, CO-OP Financial Services based in Rancho Cucamonga, Calif.

“Members began hunkering down in anticipation of prolonged stay-at-home guidelines, stocking up on the essentials but also spending more on those (Do-It-Yourself) DIY and home improvement projects they may have put off,” John Patton, senior payments advisor for CO-OP, said.

“And since they couldn’t or preferred not to travel in-person, most of that spending happened online.”

Meanwhile, credit card balances began falling last spring, and as of Nov. 30 were 4.8% lower than a year earlier, according to data from the Fed’s G-19 Consumer Credit Report.

“We might have anticipated that credit would consistently outperform debit in 2020, but that’s not the case,” Patton said.

“Instead you have certain member segments that increased debit spending when they received their stimulus checks and then immediately shifted over to credit; others tried to consistently keep their credit spending down as a precaution.”

Glynn Frechette, SVP for Advisors Plus at PSCU, said strong gains occurred across the major merchant categories of goods and services.

PSCU’s reports are made on a same-store basis, meaning a member credit union’s results are included only if it also has results for the prior period. The St. Petersburg, Fla.-based payments CUSO’s report released Monday also showed these 12-month changes:

• Goods spending rose 38.4% by debit and 21.7% by credit.
• Service spending rose 12.8% by debit and 7.1% by credit.
• Grocery spending rose 10.5% by debit and 15.1% by credit.
• Travel fell 24.7% by debit and 49.9% by credit.
• Entertainment fell 27.7% by debit and 43% by credit.
• Restaurants fell 1.8% by debit and 21.3% by credit.