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Credit Card Savings Could Heat Up Slow Summer Spending

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Credit Card Savings Could Heat Up Slow Summer Spending

Temperatures rose in July, but consumer spending wasn’t exactly hot. When it came to shopping, customers had a case of the chills, First Data reports in their monthly SpendTrend analysis.

First Data, a payment processor, issues its SpendTrend report each month, tracking consumer spending by category. In July, they report that economic recovery is still thawing, with the volume growth of 5.7 percent representing the slowest growth seen all year.

At a time when many people could be expected to spend money on summer vacations, parties, camps, and entertainment, the only areas that showed a slight upward tick in spending were back-to-school shopping, discount retailers, furniture, and garden equipment. Summer vacation spending was increased, and hotels saw some growth in profit, but overall spending is still sluggish.

Credit, Debit, Prepaid Only

First Data only looks at spending on credit cards, debit cards, and prepaid cards, so if customers were throwing around large amounts of cash, it wasn’t accounted for in the SpendTrend report. However, there is no reason to believe that this was the case. With the economy is still in recovery from the recession, slow spending is no surprise, and in the era of plastic payments, spending on credit, debit, and prepaid cards tends to be a reliable measure of consumer habits.

Rikard Bandebo, vice president of First Data, says of the report that “Consumers’ moods will remain relatively downbeat until clearer signals emerge that the economy is stabilizing again. Several macroeconomic factors are weighing heavily on consumers ability to increase spending including weak income and employment growth. Merchants will be watching carefully to see if early indications of strong back-to-school spending continue to materialize in August.”

Meanwhile, some indications of things to come are already there. Looking back at previous months, according to Federal Reserve, borrowing in revolving credit category increased at an annual rate of 11-1/4 percent in May, and saw a slight decrease in June, by 1/2 percent. Overall, this Spring, consumers pressed significantly towards credit cards, which contributed to overall consumer credit increase at a seasonally adjusted annual rate of 5 percent, in the second quarter. In June alone, consumer credit increased at an annual rate of 3 percent. This availability in credit and the need to prepare kids for school may turn August around for many retailers.

Savings Heat up in Fall

Despite summer vacations and money spent on fun in the sun, fall is traditionally a better time for big shopping, as consumers head back to stores to stock up on school supplies and new clothes. The winter holidays are right around the corner as well, beginning with Halloween – stores will be decorated with Jack-o-Lanterns any day now – and going strong right through Valentine’s Day.

The best retail deals are often found in fall, with merchants slashing prices for back-to-school and credit card issuers giving bigger cash-back rewards in categories shoppers are most likely to frequent. For example, the popular Discover More card’s five-percent cash-back rotating category this fall is called “holiday fun” – that encompasses department stores, toy stores, electronic stores and movies.

Discover has consumers covered from back-to-school (department stores for first-day-of-school outfits, electronic stores for shiny new laptops) to holiday shopping (toy stores) and winter vacations (movies).

Combining Discounts Lets People Spend More, Save More

For consumers who are a little spending-shy, combining credit card rewards programs with store discounts can be a good strategy for saving. For example, once those stylish back-to-school outfits go on clearance in October, savvy shoppers can snap them up at up to 75 percent off. Since Discover will still be offering five percent off at department stores, that means consumers can get 80 percent off, after the five percent cash back bonus.

People who want to save on back-to-school shopping and give the economy a boost while they’re at it can take a look at’s Back-to-School Savings Study to find out how choosing the right payment method at the checkout counter can add up to big savings.

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