By: Velera

In the March edition of the Velera Payments Index, we see that consumer sentiment began waning in February with concerns of anticipated inflation increases amidst an increasingly volatile political climate. Growth in purchasing activity remained positive, but February year-over-year results softened for both credit and debit activity. This edition also revisits a Deep Dive into Delinquencies and examines differences by generations and credit scores.

The Consumer Confidence Index had a sharp decline in February of 7.0 points to 98.3 (1985=100), and is at the bottom range of monthly scores since 2022. Likely influenced by the fear of tariff-induced price inflation, the University of Michigan Index of Consumer Sentiment fell by 10% to 64.7 in February. Jobs grew by 151,000, with increases in healthcare, financial activities, transportation and warehousing and social assistance. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate increased slightly for February, but that was in advance of the job cuts from the Department of Government Efficiency (DOGE).

Key Takeaways

Key takeaways from the March 2025 edition of the Payments Index include:

Growth rates softened for credit and debit in February. On an adjusted basis (to account for the leap year in 2024), credit purchases were up 0.5% and debit purchases were up 5.7%. Credit transactions were up 0.7% and debit transactions were up 2.3%. Unadjusted (with one extra day in February 2024), credit purchases were down 3.4% and debit purchases were up 1.4%.
Money Services maintained its position as the top contributor to growth in debit purchases, accounting for one-third of the year-over-year increase. The Goods and Services sectors represented the second- and third-largest impact for debit, respectively. For credit purchases, the Services sector was the largest contributor to growth for February. Within Services, insurance sales/premiums were the top merchant category.
The 12-month CPI through February increased by 2.8%, down 0.2% from January. The Shelter index accounted for almost half of the overall increase and was up 0.3%. Core inflation, now at 3.1%, was up 0.2% for February. The Fed held interest rates steady following their meeting on March 19, with the next opportunity for a change coming May 7.
Delinquencies rose after bottoming out in May 2021 at 1.03%, but have remained stable since our last delinquency Deep Dive (February 2024). Overall credit card delinquencies for February 2025 were 2.49%, down 0.11% year over year. However, we also saw higher delinquency rates within the younger age demographics. The Boomer+ (oldest) population had the lowest delinquency rate (1.69%) for February 2025, while Gen Alpha (youngest) had the highest rate (4.96%), up 17% year over year. Gen Z (the next youngest generation) had the second highest delinquency rate (4.23%) for February, but it was down from 4.81% year over year, with that cohort showing the largest improvement for any generational segment.

What Should Credit Unions Do Now?

Enhance delinquency management tactics. Engage cardholders in their preferred channels by leveraging advanced technologies and multi-channel communications options. Velera’s TriVerity, a comprehensive first- and third-party collection agency, offers a delinquency management suite of services, along with a payment portal and client support.
Revisit fraud strategies with an omnichannel perspective. The best time to evaluate whether your fraud and risk mitigation portfolio is keeping pace with the expanding fraud landscape is before an attack. Be proactive.
Plan for summertime card marketing campaigns. Summer Travel & Gas and Amazon are two “spend & get” campaigns from Velera’s Advisors Plus. Enrollment deadlines are April 1 and April 15.
Increase promotion of financial literacy, especially for younger members, given the observed higher delinquency rates and propensity for utilizing Buy Now, Pay Later (BNPL) within those generational cohorts.

BNPL Lookback (Gen Alpha)

As highlighted in the Deep Dive of the February edition of the Payments Index, BNPL services are rising in popularity, especially with the younger generational cohorts (Gen Z and Gen Alpha). We further analyzed members that made BNPL payments and cross-referenced BNPL participants and credit cardholders within the Payments Index population to better understand the importance of BNPL activity and credit performance within Gen Alpha. The average Gen Alpha BNPL credit utilization was 60.7%, with 73.1% paying less than the statement balance and 6.2% paying after the due date. It’s crucial for credit unions to offer flexible repayment options, early intervention strategies and financial education about responsible usage of BNPL services in order to help members manage debt and avoid deeper financial distress.

Checking In: Government-Licensed Internet Gambling

The popularity of online sports gambling continues to grow. Following Super Bowl LIX in New Orleans on Feb. 9, purchases within the combined group of gambling-related merchant category codes (MCCs) were up 29.3% for debit purchases and 22.1% for credit purchases compared to 2024. Despite the Super Bowl being one of the largest sporting events of the year, the weeks leading up to the event were actually not the busiest for this spending category. Starting in September 2024, transactions increased through the end of the year and peaked at 169 in December. The volume of various fall sporting events from the NFL, NBA and NHL, as well as various collegiate sports, contributed to the increased activity. FanDuel, DraftKings and BetMGM made up the majority of debit activity market share for the 2025 year-to date debit activity.

Looking Ahead

Credit card delinquencies are expected to continue to rise, with delinquency rates projected to reach 2.76% by the end of 2025 – driven by inflation, interest rates and ongoing economic uncertainty. Credit unions must be prepared to proactively support members facing financial hardship.

Despite the uncertainty about the future due to an increasingly unsettled political climate, credit unions should remain proactive in their decision-making. We hope that our credit unions are able to leverage the insights from this and future editions of the Velera Payments Index to help make informed and strategic decisions to best serve their members.