Using Prepaid Card Data to Track Spending Trends

The Federal Government publishes quarterly data about consumer credit trends. This data is used to track sales, spending habits, and credit utilization. But what about tracking spending habits and trends of people who don’t typically have access to credit? NetSpend Corporation, one of the largest prepaid debit card issuers, may have the solution.

On October 2, 2009, NetSpend Corporation (issuer of the excellent NetSpend prepaid Visa and NetSpend prepaid MasterCard debit cards) announced it’s first monthly “National Spending & Savings Index” results, which uses data from prepaid card holders.

We think this is an excellent idea. Some estimate that there are 40 million underbanked individuals in the U.S. Many of these individuals don’t have access to traditional credit or bank accounts. Many use prepaid debit cards, such as those offered by NetSpend. NetSpend’s data can help provide better insight into how those individuals spend and whether they are optimistic, pessimistic, etc.

Here’s a quote from today’s NetSpend announcement:

National spending trends saw the largest gains in the “Groceries” (+7.75%), “Travel/Entertainment” (+6.91%) and “Personal and Professional Services” (+9.67%) categories. This demonstrates that people are eating at home more often instead of going out, as evidenced by a 1.5 percent decrease in the “Food” (dining out) category. Even the increases in the “Travel/Entertainment” and personal categories are modest, suggesting that people may simply be treating themselves after a year of recession and reduced spending. Lifestyle categories with the largest declines include “Home” (-3.12%) and “Finance” (-4.64%). These declines reflect efforts to minimize unnecessary expenses. In particular, researchers saw a significant decrease in ATM withdrawals as consumers find ways to obtain cash at a lower cost.

The index also shows some encouraging trends for savings by low to moderate income consumers. For example, the data shows that there was a significant increase in the number of NetSpend Savings Accounts opened by consumers. (Unfortunately,the average balance of NetSpend Savings Accounts fell slightly from an average of $24.09 in September 2008 to $23.22 in September 2009).

The index provided by NetSpend will likely be an important economic tool for predicting, monitoring and reacting to savings and spending trends among low to moderate income households in the U.S. We look forward to checking the data monthly.

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