Cyber Monday online sales showed healthy increases over last year, but the credit card industry is bracing for an overall gloomy forecast: Up to one-third fewer Americans say they will put gifts on charge cards this holiday season.
More shoppers are planning to use debit cards and cash, instead of credit cards, when purchasing gifts, according to a National Retail Federation survey. About 68 percent of shoppers intend to use cash or debit cards to pay for presents, and about 29 percent will hand over their credit cards.
The Federation says the shoppers expecting to spend with cash increased by 9.1 percent compared to last year. The number of consumers saying they’ll charge it went down by 10.1 percent. The higher number, about 43 percent, said they will use their debit cards, about a 4 percent increase.
In a separate survey by America’s Research Group, which used questions supplied by Reuters, the results were even gloomier for credit card issuers. Only 14.2 percent said they will use credit cards to pay for holiday presents this year, one-third less than paid with plastic last year.
“If consumers follow this, and I think it’s likely they will, retailers are going to be in for big, big problems,” Britt Beemer, founder of America’s Research Group, told Reuters. “If you pay with cash, you only spend what you’ve got.”
He said that shoppers normally spend 40 to 50 percent more when they shop for presents using credit.
Overall, the NRF, the world’s largest retail trade federation, projected holiday retail industry sales to decline one percent this year to $437.6 billion.
“While this number falls significantly below the ten-year average of 3.39 percent holiday season growth, the decline is not expected to be as dramatic as last year’s 3.4 percent drop in holiday retail sales nor as severe as the 3.0 percent decline in annual retail industry sales expected for all of 2009,” the NRF stated in a press release.
Two of the biggest factors in the decreased use of plastic this season: the highest unemployment rate since the early 1980s, about 10.2 percent for October, and rising credit card interest rates by the largest issuers ahead of reform laws in February. The jobless rate has fueled steady increases in the credit card delinquency rates, or customers who are at least 30 days late in their payments, among the largest card issuers.
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