With Black Friday right around the corner, American consumers are gearing up for the start of the holiday shopping season. Given the high unemployment, foreclosure and bankruptcy rates, however, many consumers are forced to cut back their holiday spending once again this year. Although the recession is over, Americans are still struggling to make ends meet while dealing with burdensome credit card debt.
As such, many consumers will continue the spending habits they adopted during the recession. These habits will become permanent for many, according to Ed Farrell, director of the Consumer Reports National Research Center. While some people have learned they can get by without all the extras they enjoyed before the recession, others will stay within a budget out of necessity.
One of the biggest cutbacks of this year's holiday season appears to be the use of credit cards. Consumers are cautious about carrying a credit card balance. Some consumers might be reluctant to use credit cards after successfully discharging their credit card debt through bankruptcy or paying off their balances.
Some consumers facing financial difficulties might choose to keep their credit card balance low while refraining from making other payments so they will be able to charge necessities to credit cards if necessary. Others might not use credit cards because their bad credit makes it difficult to obtain credit.
Whatever the reasons, the retail industry is expected to suffer from lackluster sales this holiday shopping season. The "buy now, worry later" mentality is slowly dying out. In fact, a survey by the USAA Foundation reveals that 40 percent of Americans plan to spend less on holiday gifts than they did last year. One in ten respondents said they were foregoing holiday shopping altogether.
In our next blog post, we will continue to look at the declining use of credit cards among struggling consumers and how will it affect economic recovery.
Source: The Salt Lake Tribune "Retailers brace for shopping shift away from credit cards," Lesley Mitchell, 20 November 2010