Christmas Credit Down

Posted by: Gene M. | Dec 20,2007


I guess a lot of people have gotten the message that you should minimize the use of credit for Christmas shopping.  Consumer Reports reports that Christmas shopping with credit is down this year.  They must be coming to Experts on Credit and reading all of our articles related to the subject.  The report says:

“As consumers reach for their wallets to purchase holiday gifts, nearly eight in 10 will pay in cash (79%), followed by credit (45%) and debit cards (40%), Consumer Reports found. Although fewer consumers are using credit cards than last year, those who are using them expect to charge an average of $723 – up from $626 last season.”

Putting aside for the moment that 79+45+40 is more than 100%, the numbers are encouraging.  I don’t know exactly how the questions were worded, but I imagine that some people equate debit with cash.  The money is coming directly from the account, so it’s as good as cash.  This is partly true, but as written about here, debit does have some disadvantages, such as less consumer protection than credit.  Then again, carrying around $700 in cash isn’t exactly safe either.  No method of payment is 100% safe.  

It’s interesting that those who intend to use credit for purchases are apt to spend almost $100 more this season.  By and large, the people who use credit most are those who can’t afford to do otherwise.  The top 1% of wealth may rack up a large credit card debt because whatever debt they have, it will be lower than their incomes, but that is a major minority of people.  Most of us aren’t Bill Gates.  I wonder what his credit card bill looks like anyway.  What this all means is that those who are spending $700+ on their credit card most likely cannot afford to pay off those purchases in the short term and also likely have an interest rate on the high end.  

To these people I say be careful.  Do you really need to be spending close to a $1000 for Christmas presents?  Could you be cutting that by a couple hundred dollars and still be met with gratitude?  After all, it’s the thought that counts.  If you’re using credit because you can’t afford it otherwise, this is a clear signal that you need to keep your spending down.  An empty credit card balance is not license to overspend on the card.  

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