High-end spenders who tightened their belts in 2009 are starting to loosen them up, as such consumers likely are behind an overall increase in credit card spending last month, suggests First Data Corp.’s August SpendTrend payment card transaction analysis of all store sales activity that First Data processes.
At the same time, growth in signature- and PIN-debit transactions is decelerating though still relatively high, the analysis shows.
Credit card transaction growth in August accelerated for the third consecutive month (see chart), according to the SpendTrend report. Year-over-year growth was 3.7% in August, an increase from 1.9% in July
“We’re seeing two different types of spending emerge,” Silvio Tavares, senior vice president and division manager for First Data’s information and analytics services and publisher of SpendTrend, tells PaymentsSource. “On the one hand, the high-end consumers are feeling more comfortable using credit and have been increasing their purchases even for discretionary items, like vacations.” He points to an increase in hotel-stay purchases, which was up 9.4% in August.
“On the other side of the spectrum is the low-end consumer who may be dealing with unemployment and is really holding back on purchases,” Tavares says, citing the average purchase decline of 4.8% in quick-service restaurants and a 2.5% decline in purchases at value retailers as indicators of that segment’s behavior.
Meanwhile, as credit card use increased, debit card transactions grew at a slower rate. Signature-debit transaction volume grew 11.5% in August from a year earlier, while PIN debit grew by 9.1%. But represent less growth than previous months, which had logged respective increases of 12% and 13% (see chart).
High-spenders likely are switching from debit back to credit as they feel more comfortable with the economy, while low-end consumers are still struggling and remaining cautious, says Tavares.
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