Date: 2009-11-26
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AUSTIN, TX — While the recent rise in the gross domestic product indicates that economic recovery may be on the horizon, that recovery may be slow in coming as low- to moderate-income consumers are still in recession mode, closely watching what they spend on goods and services and spending more on groceries versus on dining out, according to findings of the "National Spending & Savings Index" produced and released by NetSpend Corporation, a provider of prepaid products and financial services to low- to moderate-income consumers.
(Media-Newswire.com) - AUSTIN, TX — While the recent rise in the gross domestic product indicates that economic recovery may be on the horizon, that recovery may be slow in coming as low- to moderate-income consumers are still in recession mode, closely watching what they spend on goods and services and spending more on groceries versus on dining out, according to findings of the "National Spending & Savings Index" produced and released by NetSpend Corporation, a provider of prepaid products and financial services to low- to moderate-income consumers.
The monthly index tracks year-over-year spending trends of these consumers in eight "lifestyle" categories, including "Home," "Food," "Personal and Professional Services," "Travel/Entertainment," "Finance," "Utilities," "Groceries" and "Auto/Gas/Transportation" expenses. Each lifestyle category is composed of smaller subcategories (e.g. "book stores"), which track spending at the merchant level.
The NetSpend National Spending & Savings Index also surveys the average balances in cardholders' NetSpend Savings Accounts during the same time period. Combined, the spending and savings trends are indicators of changes in consumer habits and are based on aggregated cardholder data from almost 900,000 NetSpend cardholders around the country. As a leading provider of prepaid debit cards, NetSpend is able to provide unique insights into the spending habits of low- to moderate-income (LMI) consumers—those between the ages of 30 and 50 with an average annual household income between $25,000 and $40,000.
National Trends
National spending trends saw the largest gains in the "Groceries" (+8.39%), "Personal and Professional Services" (+5.81%) and "Travel/Entertainment" (+3.01%) categories. This demonstrates that people are eating at home more often instead of dining out, as evidenced by a 3.03 percent decrease in the "Food" (dining out) category. Though small, the increase in the "Travel/Entertainment" category may hint to a coming increase in discretionary spending. Lifestyle categories with the largest declines include "Auto/Gas/Transportation" (-5.32%) and "Food." These declines may reflect the stabilization of prices coupled with efforts to minimize unnecessary expenses. In particular, researchers continue to see a significant decrease in ATM withdrawals as consumers find ways to obtain cash in locations that don't charge fees.
Year-over-year spending comparison: September 2008 vs. September 2009 Lifestyle Category National
Home ↓ 0.85%
Auto/Gas/Transportation ↓ 5.32%
Finance ↓ 2.01%
Food ↓ 3.03%
Personal & Professional Services ↑ 5.81%
Travel & Entertainment ↑ 3.01%
Utilities ↓ 0.35%
Groceries ↑ 8.39%
Savings trends for the low- to moderate-income consumer across the nation are encouraging. The data shows that the average balance of NetSpend Savings Accounts rose from an average of $25.71 in September 2008 to $27.30 in September 2009. Researchers say that this increase demonstrates that people are still worried about their finances and are looking for ways to save more and earn interest on their money.
"Nationwide, low- to moderate-income consumers are still in recession mode and are spending their money on necessities versus extras," said Dan Henry, chief executive officer of NetSpend. "One trend we continue to see is that people are figuring out how to avoid fees associated with ATMs which may include selecting the 'cash back' option at grocery stores or other retail outlets. Consumers are working to make the best use out of every dollar they make and avoiding bank fees is a large part of that equation."
Regional Trends
The index also examined spending patterns in Central Texas, Houston and Phoenix. The index demonstrates that like the state as a whole, Central Texas and Houston have fared better than the rest of the nation. "Travel & Entertainment" spending was up in all three markets is likely an indicator that consumers are becoming more comfortable increasing their discretionary spending. Houston continues to experience increased utility rates in the wake of last year's Hurricane Ike while Austin experienced lower spending on utilities. Phoenix saw spending rise on groceries as people may have cut back even more on dining out.
About NetSpend Corporation
NetSpend Corporation is one of the leading providers of prepaid debit cards in the United States. A pioneer in the industry since its inception in 1999, NetSpend prepaid debit cards offer financial freedom and convenience to the more than 100 million underbanked consumers in the United States. NetSpend is the only company in the prepaid debit industry to offer an end-to-end solution for consumers and merchants with a proprietary processing platform, card fulfillment, customer service and risk management capabilities. More information about the company can be found at http://www.netspend.com or by following the company on Facebook or Twitter.
Media Contact:
Brad Russell, Corporate Communications Manager
NetSpend Corporation
Telephone: (512) 539-5932
E-mail: brussell@netspend.com