December 5, 2008
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News: Consumer Shopping
According to Consumer Reports, shoppers will be cutting back on use of credit cards this season. When surveyed, about 21 percent of the consumers projected they would be using cash instead of credit cards for the Christmas holiday. Half or the respondents intend to buy less on credit and stay within what they have on hand. The greatest contrast was found among the 18 to 34 age group. These are the consumers who, typically, tend to rely on credit cards more heavily. This is one of the greater changes in the American culture. It's not only a very healthy one, but has now come to be an absolute necessity.
The good news, consumer advocates claim is that consumers are now learning to spend within their means. Though they may not admit it now, this is also good news for retailers. It's simply a matter of returning to reality. Considering that household credit card spending has spiraled out of control in the last 20 years something must be done now. Back then, consumers were only $2,739 in credit card debt (adjusted to inflation). Since then, however, that figure has leaped up to $6,528. This is an 138 percent increase. There were few reality checks up until now and everyone's been hurt from it.
So, the good effect now is that consumers are forced to live within their budgets. Cofounder of Credit.com, Adam Levin, explains it this way: "Cash and debit are self-regulatory and self-control methods. It's tougher to hand over $100 than it is to just hand over your credit card." That $5 cup of coffee is being substituted with one for $1.50 at Duncan Donuts. ‘Family gifts' are replacing individual gifts under the tree. No one's getting ‘cheap' about the situation. What they're basically saying is: "I don't want to go bankrupt". The pay just isn't there anymore. Living beyond one's means eventually hurts everyone.