January 06, 2009
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News: Smarter Buying Habits are Becoming the Rule.
At least for the next little while, once-bitten consumers are becoming shy of using their credit cards. It's like, they look around and see what's happening to ‘the others' and decide to back off before it happens to them. Kind of when like, when you're speeding down the road and the car next to you gets pulled over. You tend to slow down – for a little while, at least. How long this new-found wisdom sticks is yet to be seen. But, more reinforcement is on the way. This year is not predicted to be the end of the credit card woes and could prove to be worse than last. We're all hopeful to see the roots of a turn-around shortly after Obama's inauguration in two weeks but we still have to come to grips with the magnitude of the damage. Will credit cards ever be the same? Eventually.
Most of the analysts do agree that our population will continue for the next while, trying to wean themselves from the disproportionate dependency we have placed on credit cards. The trend is steadily growing of reducing credit card debt and, at the same time, building up savings portfolios. This is the reversal of a twenty-year trend. This will not have an avalanche effect, however. Counter currents will also increase caused by the cash-dry unemployed who will have little choice but to survive off credit cards just to live. The problems are both, profound and manifold.
Meanwhile, the retail industry is up against the wall. Now that its 40% of the year's profits have all-but slipped them by over the Christmas season, how will they survive the rest of the year? A full store with long waiting lines doesn't necessarily indicate a profitable business. If all the consumers are buying are necessities and sale items, as they are now, then discretionary and impulse-buying are out the window. Nearly all the significant profit margins are found with credit card spending.
With consumers using either cash or necessity-based credit card purchases, profit margins go away. This is not expected to improve for a long time. It is becoming a self-eating watermelon, as retail is forced to cut back on inventory and staff. Massive lay-offs are sure to follow which will in turn, speed the demise even more.