Stores Report Shoppers Preference for Cash and Debit Cards
According to the Associated Press, more shoppers are turning to cash and debit cards and avoiding credit cards, at least so far, to do their holiday shopping. Retail giants including Wal-Mart and Target have reported a drop in credit card transactions and the overall shift away from the use of credit cards as the preferred means of payment for consumers to purchase their goods and services.
Several reasons for the rise in use of cash and debit cards were cited. First off, many of the major credit card companies have reduced the credit limits on their cards. This has pushed many credit card account holders closer to maxing out their credit card accounts. In many cases, they simply have no more credit to use. Higher fees are another reason cardholders have turned to cash. Higher fees and lowered spending limits are even being imposed on people that pay their bills on time.
These new developments fly in the face of America’s love affair with their credit cards. It is a direct byproduct of our current credit crisis that was precipitated by the collapse of the housing market. In my opinion, it will surely add to what will more than likely be a lackluster holiday season for retailers. In years past, shoppers would turn to their credit cards to provide them with extra buying power during the holidays. That option is no longer available for many Americans.
This may signal a more permanent shift in spending habits for consumers. We could see a movement towards eschewing credit and only buying those things we can pay for with cash. Retailer J.C. Penney recently reported that they are seeing an increase in spending around the paycheck cycle of their customers. This further signals the preference for using cash as opposed to credit and suggests people are only buying the necessities.
While the current recession lingers and may last for years, we will not know the extent of its damage for some time after it has ended. The question is, will consumers return to their reliance on credit cards or will they continue to pay cash and spend within their means, foregoing the use of credit. Only time will tell, but I will add this – the death of the credit card is not coming any time soon.
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