Consumers vowing to rein in credit card spending over the Holidays so far appear to be following through on their resolve to kick the plastic habit.
According to a recent survey of almost 10,000 consumers commissioned by the National Retail Federation, fewer people are using credit cards for this year’s Holiday shopping. 30.9 percent said they used credit cards compared to 33.8 percent last year, an almost 10 percent decrease from 2008. Women used credit cards less than men, with 29.1 percent of women paying for Holiday purchases with credit cards versus 32.8 percent of men.
“As expected, shoppers have shown tremendous restraint in buying gifts with the money they already have, not the money they hope to have,” said Phil Rist, executive vice president, Strategic Initiatives, BIGresearch, which conducted the survey for the NRF. “Relying less on credit for holiday purchases will help consumers feel more comfortable about their personal finances again and may make them more willing to spend in the future.”
So, what did shoppers use instead? Debit cards and check cards emerged as the new preferred payment method, with almost four out of ten (39.3 percent) choosing to pay for purchases with their debit card. Debit cards were particularly popular with women; 41.1 percent of female shoppers said that they paid with debit cards versus 37.4 percent of men. Since women tend to do most of the family shopping, this might mean that the total dollar amount shifted to debit cards from credit cards may be considerably larger. About one out of four shoppers paid with cash (26 percent), and only 3.8 percent used checks.
Will consumers’ new-found credit card restraint hold up? It’s too early to tell. According to the survey, most consumers still have a lot of Holiday shopping remaining. The average person had completed 46.7 percent of their holiday shopping by the second week of December, and nearly 42 million people (19.1 percent) were yet to launch their Christmas shopping. Only 8.6 percent of consumers said they had completely finished their Holiday purchases.
And of course, as Christmas looms closer, so do the temptations trying to lure in shoppers.
“Retailers know the final lap counts the most and are planning to emphasize promotions and discounts to bring in last-minute shoppers,” said Tracy Mullin, President and CEO, NRF. “As Christmas Day creeps closer, retailers will be ready for an influx of procrastinators, from those who are checking the final names off their list to millions who haven’t even started shopping.”
More than one third (35 percent) of the consumers surveyed said they planned to complete their shopping before December 19th. However, the remaining two thirds said they wouldn’t buy their last Holiday gift until sometime within the last five days before Christmas. And with last-minute, rushed shopping, the temptation for impulse purchases and spending more than originally planned is likely to be much greater.
Still, so far so good. If the current trend continues, cardholders may face less of a hangover when January’s credit card bills begin to pile up in the mailbox. And with credit card defaults continuing at record levels, this would be good tidings for all.
