Velera: Lower Food Costs Trim Payments Growth

Slower inflation helped consumers pay less at the grocery store in April, which contributed to lower growth in spending for credit union members whose credit and debit card purchases are handled by the nation’s largest payments CUSO.

The latest Velera Payments Index (formerly the PSCU Payments Index) showed spending rose 1.1% by credit and rose 3.2% by debit. Grocery and restaurant spending lowered growth by 0.6 percentage points by credit and 0.3 percentage points by debit.

Meanwhile, the U.S. Census Bureau reported retail spending, excluding automobiles and parts, rose 4.1% in April from a year earlier, while the Bureau of Labor Statistics reported inflation rose 3.4%.

April data from Velera, Census and BLS also showed:

• Gasoline spending rose 5.3% in April from a year earlier, while gasoline prices rose 1.2%. At Velera, spending was unchanged via credit or debit.
• Grocery store spending fell 1.3% in April from a year earlier, while inflation for food at home rose 1.1%. At Velera, spending fell 3% by both credit and debit.
• Spending at restaurants and bars rose 4.9% in April from a year earlier, while inflation for food away from home grew 4.1%. At Velera, restaurant spending was flat by credit and rose 1% by debit.

Velera’s report showed members spending slightly less on groceries so far this year than a year earlier, but Norm Patrick, vice president of Advisors Plus Consulting at Velera, said earlier inflation has raised food spending to an unusually high percentage of household budgets.

“As overall inflation continues trending downward, consumer spending growth remained at modest levels in April,” Patrick said.

“We see grocery store spending maintaining the largest allocation of spend across both credit and debit,” he said. “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.”

Velera found combined spending at grocery stores and restaurants accounted for 20% of purchases by credit card and 29% by debit among affiliated members. Grocery store spending accounted for 53% of the combined food spending by credit and 57% by debit in the Velera sample.

For January through April 2024, overall food purchases by credit card rose 1.8% while the number of transactions rose 2.7%. That worked out to average food spending of $38.62 per transaction, down 0.9% from the first four months of 2023.

By debit, overall food purchases for the first four months of this year rose 2.5% and transactions rose 2.3%, or $32.01 per transaction, up 0.2%.

The average purchase at grocery stores was $52.98 by credit for the first four months, down 1.6% from a year earlier, while the $52.09 average by debit was down 0.5%.

The IRS reported that the average refund this year was up 4.6% at $3,011 compared to last year, but it did not report the average tax due. However, during the January through April income tax season, Velera found average federal, state and local tax payments were $673 by credit, up 6.2% from a year earlier, and $266 by debit, up 6.3%.

Total credit card balances among Velera-affiliated credit unions on April 30 were 6.7% higher than a year earlier, but down 0.4% from March 31. The average credit card balance among members was $2,899 on April 30, up $77 or 2.7% from a year earlier, and down $9 or 0.29% from March 31.

Balance transfers historically peak in March. In Velera’s previous report it found balance transfers in March were down 37% from a year earlier, as credit unions distributed fewer offers.

In April, the dollar volume of balance transfers was 4% lower than a year ago, while the number of transactions fell 18%. While there were fewer using them, those that did made larger transactions: 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,” the report said.

The credit card delinquency rate was 2.34% on April 30 — down from 2.42% in March and up from 1.81% in April 2023.

The Velera Payments Index was based on data from credit unions that have been processing payments with Velera since January 2022. It encompassed 3.1 billion transactions valued at $158 billion of credit and debit card activity in the 12 months ending April 30.