by Jaclyn Giovis
Thursday, November 25, 2010
Even the happiest of holiday seasons often has an unpleasant way of lingering on long after the turkey's been carved, the presents unwrapped.
Credit cards: they show up like an unwelcome guest just when you thought you were done with the holidays. But this year could be different.
"Many families may choose to leave credit cards at home as they shop this year, making sure to only purchase what's on their list and within their budget." That's according to Matthew Shay, president and CEO of the National Retail Federation, which just released the 2010 edition of its annual holiday shopping survey.
Studies show more consumers are getting tired of holiday statement shock, and they're swearing off credit cards. In fact, it could be the worst holiday shopping season for credit card companies since 2002.
Only about 27.6 percent of shoppers will charge their gifts this year - the lowest number in eight years, according to the survey.
Consumers avoid new debt in down economy
Many consumers are crawling their way out of credit card debt during difficult economic times, and don't want to be deeper in the hole. Others are finally debt-free and will be leaving their cards at home to avoid overspending and getting into financial trouble again, said Britt Beemer, founder of America's Research Group.
"They don't want to go back to the day where they're getting those calls [from credit card companies' bill collectors] everyday," Beemer said. He produces another survey, which says only 15.8 percent of shoppers are using credit, down from nearly 38 percent last year.
Fewer credit card purchases means more people will use their debit cards or cash to pay for holiday gifts. Debit cards will be the primary form of payment for about 43 percent of holiday shoppers, while another 25.7 percent will use cash, the NRF survey found.
Cash buyers means lower sales
If more holiday shoppers use cash, retailers could see chilling sales results and the U.S. economy could be wounded as it tries to recover. Stores count on a stellar holiday season to meet their annual sales projections. Retail sales are the biggest driver of economic growth in the U.S.
"There's a huge difference between a cash customer versus a credit customer," Beemer said. Cash shoppers don't spend half as much as credit card shoppers on any given purchase, and consumers are still are keeping a tight grip on their spending amid the gloomy economy, he said.
Still, there's always the temptation to simply charge it.
Credit card companies have been playing to that desire for years, and this year they are pulling out the stops to entice holiday shoppers to swipe. For example, Visa is offering online deals such as 20 percent off full-priced items at Banana Republic and $10 off purchases of $100 or more at TigerDirect.com.
Mastercard credit card holders can sign up for daily online-only discounts. But in a sign the credit card company may be worried about consumers' resistance to charge, it also is urging consumers wary of credit cards to use its prepaid card for holiday purchases.
"Can your cash do this? Allow you to shop online. Pay your bills online instead of waiting in line. Be replaced if it's lost or stolen," Mastercard says, in its Web marketing campaign.