Holiday Shopping – Without Credit Cards? Lowest Use of Credit in 27 Years(!)

Holiday Shopping – Without Credit Cards? Lowest Use of Credit in 27 Years(!)

David Rosenberg writes today in his always excellent Lunch With Dave:

It’s interesting that so many pundits lay claim to how great the shopping season is going – and yet nobody is using credit! Have a look at On Christmas Shopping Lists, No Credit Slips on the front page of today’s NYT. A mere 17% of shoppers have relied on plastic since the Thanksgiving weekend — half of last year’s level and lowest in the 27-year year history of the American Research Group survey.

Britt Beemer, who heads up America’s Research Group, had this to say:

“The consumer really feels a lot of pressure from previous debts, and they just aren’t going to dig themselves into that kind of hole.” That sounds pretty disinflationary to us.

The NYT piece (which you can read here) goes on to say:

“The credit card companies are falling all over themselves trying to make those rewards even better,” Mr. Robertson said. But, with customers moving to cash or debit, the companies are “simply less profitable,” he said.

James Hansen has been avoiding credit cards for months. He began accumulating debt when he went on short-term disability leave from his job as a maintenance engineer about three years ago, just after getting married and having a second child.

“Half of my payments were interest,” said Mr. Hansen, 34, who lives in Kihei, Hawaii. “I’m still working on paying off the bills.”

This holiday season, he said, “I’ll buy a few gifts with cash if I can. It’s not going to be easy.”

Even for people with steady income through the recession, like Ms. Gonzalez, credit is no longer attractive.

In 2008, with a new baby and a teenage son, plus a big extended family, she would go grocery shopping using her Sam’s Club and Costco cards, and add Christmas gifts to her cart. “It was so convenient,” she said.

She knew she was charging a lot — she also had Macy’s and Kohl’s cards, and a State Farm Visa that was carrying a balance from an earlier Costco card — but she thought cash-back rewards programs would help.

“In the back of my mind, I was thinking, ‘Well, I’ll get extra cash at the end of the year,’ ” she said. But on the Costco card, for instance, she got about $80 back — a fraction of the $4,000 she had charged, or the $3,000 on her Sam’s card. Mortgage and car payments piled on the debt.

“With the interest rates, it just seemed like I never paid it off,” she said.

Sounds like the credit card companies are pushing on a string!  Like the Fed, they can extend credit, but they can’t force the consumer to take it.