COVID-era credit card spending hits new high Posted by AVCU on 8:22 AM

 As one of the biggest shopping days of the year approaches, credit card spending continues to outpace its performance at this time in 2019.

Credit card spending reached its highest point since the start of the coronavirus pandemic during the week ending Nov. 15, according to data from payments credit union service organization PSCU. It was up 7.4% from the 46th week of 2019, which ended on Nov. 17.

Debit card spending continued to increase at double the normal rate for the last several years, PSCU said. For the last week, these purchase ticked up more than 16% from roughly the same week in 2019.

The company uses card data from its credit union members.

“While debit growth continues to remain strong, credit performance for the week saw the highest growth rate since the onset of the pandemic,” Glynn Frechette, SVP, Advisors Plus at PSCU, said in a press release on Monday. “Despite the surge in COVID-19 cases around the country, spend in the goods sector showed a healthy increase, indicating holiday spending is well underway. As we move into Thanksgiving week, we will closely monitor consumer buying behavior during the upcoming Black Friday and Cyber Monday shopping days with interest.”

This could be good news for the industry. At the beginning of the pandemic, credit unions saw a significant decline in card spending compared with 2019, though that has since rebounded.

There have also been concerns that consumers may spend less this holiday season due to the economic uncertainty tied to COVID-19. If there is a decline in spending, credit unions could see interchange revenue and interest earned from credit card balances also slip.

In the second quarter, net income for the industry tumbled more than 34%, to $9.4 billion, from a year earlier as credit unions set aside more for loans to potentially sour, according to data from the National Credit Union Administration.

But revenue has fared somewhat better. Non-interest income ticked up more than 5%, to $21.6 billion, in the second quarter from a year earlier while total interest income rose 1.5%, to $60.9 billion, according to data from NCUA.

According to the PSCU data, debit card spending on goods was up almost 34% for the week ending Nov. 15, compared with roughly the same period last year. Credit card spending in this category increased more than 26%. PSCU called this “a clear sign that holiday spending is underway.”

Card-not-present shopping continued to surge in the 46th week of 2020. This was up roughly 42% for purchases and 29% for transactions for debit cards. For credit cards, it was up almost 53% for purchases and 43% for transactions.

Spending on groceries also increased with this rising more than 12% for debit cards and 24% for credit cards.

However, gasoline purchases remain “substantially down,” PSCU said. For debit card, this decreased almost 13% while the slide for credit card was nearly 22%. That makes sense given that many Americans are working from home and not currently commuting.