Note: The following article is reposted by permission from LowCards.com. A great site: check it out!
(Lowcards.com) New holiday spending surveys are providing data that shows consumers plan to cut their holiday spending and reduce their usage of credit cards. Credit card delinquency rates are up again, showing consumers are still under financial stress. Many cardholders are still reeling from large APR increases they have received this year and they can no longer afford to charge their way through the holidays.
According to the National Retail Federation’s 2009 Holiday Consumer Intentions and Actions Survey, U.S. consumers plan to spend an average of $682.74 on holiday-related shopping, a 3.2% drop from last year’s $705.01. About 71% of consumers plan to use cash, check or debit cards as their primary payment method when buying holiday gifts. Only 28.3% of shoppers will use credit this year compared to 31.5% a year ago, a 10% decrease.
“Paying with cash is the best way to add a safety brake during holiday shopping. Studies show that consumers typically spend 12-18% less when we use cash for payment. Counting out and handing over cash is a sobering reminder of how much items really cost. It makes you pause and consider if the purchase is really worth your labor,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
According to a recent USAA survey, more than half (55%) of respondents are planning to avoid charging their holiday purchases and 85% plan to use cash for some of their holiday purchases. Among the shoppers who plan to use their credit cards, 74% plan to pay off their balance immediately so that they do not pay interest. 20% say they will pay off the balance in a few months while 7% say they will only pay the minimum balance.
However, many consumers have not prepared a plan for holiday spending. 19% are not sure how they will pay for their holiday purchases. 22 % who plan to use cash haven’t saved any money in advance. (USAA survey) “Now is the time to budget and plan for your holiday shopping so you don’t get caught up in the moment and spend more than you can afford,” says Hardekopf. “Credit cards rates are now too high to just charge something and assume you will be able to pay it.
“If you charge $1,000 on a credit card with an interest rate of 15% and just pay $25 of your balance each month, it will take you until May of 2014 to pay off this Christmas, and you will pay an additional $370 in interest. If your APR was recently increased and you carry a balance, leave that card at home so you won’t charge anything more on it.”
Millions of Americans are still paying off the holiday purchases they made last year. 6% of adults–or about 13.5 million Americans–were still carrying debt from last year’s holiday season. In households with children under 12 years old, 10 % were still carrying debt. (Connumer Reports Holiday Shopping Poll, October 2009).
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.