Are You Leaving Your Credit Card In Your Wallet This Christmas?
What with rising interest rates, cancelled accounts, and slashed spending limits, it’s looking like many credit cards won’t see the light of day this Christmas, shunned in favor of the trusty (and ever more popular) debit card. A recent piece of research conducted by the National Retail Foundation found that an estimated 28.8% of people will be using credit to pay for their gifts this year, down from 31.5% last year.
Am I crazy for thinking that percentage is 28.8 points too high? I don’t know about the rest of you, but I cringe at the thought of a friend or family member putting themselves deeper in debt to buy me some frivolous gift that I’ll probably tire of before January has come to an end.
From the Wall Street Journal:
Consumer credit has deteriorated since the last holiday season, when interest rates were lower and spending limits higher, says Mr. Arnold. “Even if you got good credit, no one is immune from having their account closed.”
Last holiday season “we charged into it thinking things would end a lot quicker,” says Brian Riley, research director at TowerGroup, a financial-research consultant. Unemployment is still high and consumers are skittish about adding debt. Also, credit-card companies are under pressure from upcoming regulations concerning the credit industry, which go into effect early next year.
Plus, “there has been a practical change in people’s buying habits,” Mr. Riley says. That change has been on display this entire year. In the third quarter of 2009, credit transactions for Visa and MasterCard reached $313 billion, an 11.58% decline over the same quarter in 2008, according to TowerGroup. Debit transaction volume for Visa and MasterCard was $303 billion, a 5.21% increase over the third quarter in 2008.
While these statistics are encouraging, they’re not necessarily indicative of the country finally coming to its senses, but could simply be due to the fact that easy credit is just that much harder to come by these days. Indeed, data from Mail Monitor, a market research firm, indicates that the average credit card balance actually went up in the third quarter of 2009, indicating that the slump in holiday credit spending may simply be due to most holiday shoppers being totally maxed out.
Whatever the cause is, a couple less presents under the tree this year isn’t going to wreck anyone’s holidays, and might actually remind us all what this break is all about – spending quality time with our friends and family.
So whether you’re doing it out of necessity or choice, have a merry credit-free Christmas.
Check out the full Wall Street Journal article here.
Photo by allerleirau
Mike Cleary’s family has ditched credit cards this holiday season. He and his wife had three credit cards with a total balance of about $6,200, but paid those off because of high interest rates. “We were going to get rid of those, bite the bullet and use cash from that point,” says Mr. Cleary, a 53-year-old from Duluth, Ga.
Instead of the usual $3,000 to $4,000 he typically spent for the holidays, Mr. Cleary says he will be spending below $1,000 on his family this year. “We just told them, ‘Hey, it’s going to be a light Christmas.’ ”
Consumer credit has deteriorated since the last holiday season, when interest rates were lower and spending limits higher
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I agree – I don’t want to sound like a wacko Christmas-spirit protectionist, but I really am appalled at how overspending has become the new Yuletide tradition. Really, the season seems more like a holiday for the banks and big box retailers than anyone else.
I think Christmas stopped being fun for me when I realized that Santa was financing my gifts with a second mortgage on the workshop…
I’d like to mention that just because you are USING a credit card to pay for something does not mean you are going into debt. What about those of us who pay off the balance every month?
Frank, that’s true – a good proportion of those using their cards to pay for Christmas gifts will actually do what they’re supposed to – pay them off on time and in full.
Sadly, however, I have little doubt that they will be in the minority. Most people will start 2010 with more credit card debt than ever.
I am very adamant about not using the credit cards this year and am doing quite well. This is the first year for my husband and I to be doing this. I will say, it takes some getting used to not racking up $700 of unplanned expenses for the season, but I know it’s completely worth it. I also know, I am not one of those peeps who will pay off the balance.
No CCs in my wallet for this holiday season. :)