In the September edition of the Velera Payments Index, we saw that consumer spending growth for August remained consistent while consumer sentiment softened. The University of Michigan Index of Consumer Sentiment decreased by 2.8 points, finishing at 55.4 – with over half of surveyed consumers providing unaided commentary on tariffs. Consumer sentiment also decreased for the Consumer Confidence Index, dropping 1.3 points to 97.4. Amidst job market concerns, the Federal Reserve cut interest rates for the first time in nine months on Sept. 17.

This month’s edition features a deep dive into the Travel sector, a discretionary spending category that has softened in 2025.

Key Takeaways

Key takeaways from this edition of the Payments Index include:

Growth in debit remained consistent and improved in credit activity in August. Debit purchases were up 5.3%, with the Goods, Money Services and Restaurant sectors contributing more than 80% of the growth. Credit purchases were up 1.9%, with the Goods, Restaurant and Grocery sectors accounting for the entire increase. For August, debit transactions were up 3.6% and credit transactions were up 2.2%.
The Federal Reserve’s announcement of a quarter-point interest rate reduction has been long-awaited, especially with much weaker job growth updates. August added 22,000 new jobs, while the Bureau of Labor Statistics (BLS) reduced its current employment revision by 911,000. Fed Chair Jerome Powell signaled two possible additional rate reductions in October and December.
The 12-month cumulative CPI through August increased to 2.9%, with a 0.4% increase in August. Once again, the Shelter index accounted for most of the monthly increase. Core inflation, which excludes Food and Energy, was up 0.3% to 3.1% for August – the same rate of increase as July.
Travel Purchases for credit and debit were down for the second consecutive year, in stark contrast to the post-COVID boon previously experienced in this discretionary spending category. Year-to-date credit purchases in the Travel sector were down 4.7% and debit purchases were down 1.5%. The largest contributors to the drop in both credit and debit travel purchases were Airlines and Lodging (Hotel/Motel). Airline credit purchases were down 8.4% and Airline debit purchases were done 6.2% through August. Compared to 2024, Airline debit transactions were down 6.4% and Airline credit transactions were down 8.6%. While Cruise Lines have experienced consistently positive debit and credit purchase growth over the past 20 months, there has been some volatility — with growth fluctuating between zero and ten percent.

What Should Credit Unions Do Now?

Consumer purchase behavior is shifting in today’s economic environment — directly impacting card portfolio performance. Credit unions must protect revenue streams and capture new growth opportunities to address these realities. Consider the following strategies to strengthen portfolio resistance, deepen member relationships and plan for sustained financial performance:

Safeguard interchange revenue amidst shifting spending patterns. The slowdown in Travel spending could pressure interchange income due to higher average transaction amounts and positive interchange rates. Credit unions should launch promotional campaigns focused on resilient, high-interchange categories to drive new account growth. Maintaining a responsive, analytics-led approach can help credit unions preserve revenue.
Drive account growth and financial performance with digital origination. Credit unions can generate new accounts and fuel profitability by delivering fast, secure, mobile-first lending. Spend can be captured from day one with instant applications, real-time approvals and immediate digital card access. Consider partnering with a fintech CUSO, like Velera, to enable the launch of a seamless origination experience that meets members’ expectations.
Enhance card portfolio performance with post-holiday balance transfers. Credit unions can strengthen retention, build loyalty, grow balances and create income opportunities by implementing a convenience check balance transfer campaign. This competitive low-rate offer delivers meaningful savings for members while supporting revenue growth. Make it easy for members to transfer balances — through checks, digital channels or over the phone in order to maximize results.

Looking Ahead

There is a growing caution among consumers navigating higher prices and economic uncertainty. While debit and credit activity showed most gains overall in August, purchases in discretionary categories like Travel continued to decline.

Many tariffs took effect on Aug. 7, and their impacts are slowly materializing in consumer prices. Grocery prices increased by 0.6%, the largest monthly jump in the past three years, with heavily imported items showing greater increases. For example, more than half of the coffee imported to the U.S. comes from Brazil. Coffee prices are up 20% year over year, as Brazilian imports are subject to a 50% tariff. Velera will continue to watch for changes in spending due to tariff-related price increases as the rest of the year unfolds.

There are two remaining Federal Open Market Committee (FOMC) meetings in 2025. The next concludes on Oct. 29. Federal Reserve Chairman Jerome Powell has implied the possibility of additional rate reductions in October and December. Velera will continue to monitor these implications over time.

We hope that our credit unions can leverage insights from this and future editions of the Velera Payments Index in order to make informed and strategic decisions to best serve their members.