Growth Pace Slows but Consumer Spending Stays Positive

By Roy Urrico

While the pace of growth has slowed compared to previous years, consumer spending remained positive in May 2025 – with debit outpacing credit in both purchases and transaction volume, according to the June edition of the Velera Payments Index.

In its Deep Dive segment, the Index explored rewards and loyalty program results and “the need to understand consumer preferences for credit unions to remain top of wallet.”

St. Petersburg, Fla.-based Velera, which describes itself as the nation’s premier payments CUSO, designed the Velera Payments Index to help credit unions and other financial institutions make strategic, data-informed decisions.

Key Takeaways:

• Growth for both credit and debit for May was steady and positive, influenced by the uncertainty around import tariffs. Debit purchases were up 5.2%, with the goods sector contributing just over one-third of the growth. Credit purchases were up 1.3%, with the Goods sector contributing just over half of the increase. For May, debit transactions were up 3.2% and credit transactions were up 1.8%.

• In the Labor Department’s June 11 update, the Consumer Price Index (CPI) 12-month Consumer Price Index (CPI) through May increased by 2.4%, up 0.1% from April. The shelter index continues to contribute significantly to the monthly increase. Energy decreased by 1.0% due to drops in gasoline. Core inflation, which excludes food and energy, is up 0.1% at 2.8% for May.

Economic Indicators

Source: Velera Payments Index.

After five months of consecutive declines, the Consumer Confidence Index increased in May, up 12.3 points to 98.0. All three expectation components – business conditions, employment prospects and future income – improved from the April low, according to the Velera report.

The May 2025 University of Michigan Index of Consumer Sentiment remained unchanged from April at 52.2. “While the current outlook on the economy is unchanged, potentially influenced by the temporary pause in tariffs, concerns about the future remain top of mind for consumers,” the Index suggested.

Jobs grew by 139,000 in May, with increases in healthcare, leisure and hospitality, and social assistance, offset by a decline in jobs with the federal government. Also in the current jobs report, both March and April new jobs figures were downwardly revised, lowering the three-month average of new jobs from 155,000 to 135,000. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate was unchanged for May at 4.2%, or 7.2 million people. Contributing to the steady unemployment rate was the reduction of 625,000 people who dropped out of the workforce in May.

Deep Dive: Rewards and Loyalty

In June’s analysis of loyalty and rewards programs, Velera reported:

• The two oldest generational segments (boomers Plus/Gen X) represented 67.3% and 88.5% of rewards accounts and earnings, respectively, while the remaining generations collectively accounted for only 11.5% of rewards earnings, despite accounting for 32.7% of account mix.

• Boomers Plus and Gen X demonstrated lower rewards redemption/earned ratio at 14.6% and 15.9%, respectively, compared to younger cohorts ranging from 26.5% to 34.9%.

• Cash consistently represents the majority of rewards redemptions, with the exception of the holiday season, when a downturn in cashback was mirrored by an uptick in gift card redemptions.

Annie Cox, vice president, product management, Velera.

“Rewards and loyalty programs are most effective when they reflect the real behaviors and preferences of members. Our analysis shows that while boomers and Gen X generate the majority of rewards earnings, they tend to redeem less frequently – often saving for larger redemptions or letting points expire. In contrast, millennials and Gen Z are more active redeemers, using rewards as part of their everyday financial strategy. Income also plays a key role, with lower-income members redeeming at higher rates, suggesting a greater reliance on the tangible value rewards provide,” said Annie Cox, vice president, product management, Velera.

“These patterns highlight the importance of segmentation – not just by age or income, but by lifecycle and behavior,” Cox continued. “Credit unions that design flexible, personalized rewards experiences based on these preferences and relationships will be better positioned to build loyalty, increase engagement and become the trusted, go-to financial partner for every member segment.”

What Credit Unions Should Do Now?

According to the Index, credit unions should:

• Should strengthen their portfolios by offering competitive rewards products that drive member engagement and enhance loyalty. “Positioning rewards programs as valuable financial tools will allow credit unions to deepen member relationships, increase transaction volumes and boost fee income.”

• Explore more lower-point redemption options or gamified rewards. Drive engagement with more frequent rewards redeemers – often associated with younger generations.

• Offer a variety of compelling travel and “trophy purchase” redemption options. for higher-income, typically older members who tend to accrue a higher percentage of earned rewards.

Encourage active participation in loyalty programs. Launch customized, targeted, multichannel marketing campaigns to boost engagement with cardholders, including reminders for soon-to-expire point