Consumers Ditch Credit Cards in Holiday Spending
More than 60 percent of American cardholders who participated in a survey said they will pay cash and avoid using credit cards in holiday spending. The study was done in October.
In an online survey conducted by the National Foundation for Credit Counseling (NFCC), a nonprofit organization that promotes financially responsible education and credit counseling, more than 3,800 consumers participated. About 68 percent of participants responded that they will not use credit cards for holiday shopping.
Twelve percent of consumer-respondents said they will still use credit cards, but will pay the debt in full when a bill arrives in order to avoid paying interest rates.
Ten percent said they will charge their holiday expenses in cards and pay debt in installment method.
Consumers also favor the layaway programs that are offered by shops and retailers. Ten percent of respondents said they will use this payment plan.
In December 2008, only seven percent of consumers utilized this payment scheme. Shops and retailers started implementing this program as early as October this year to accommodate consumers who are either short in cash, have limited credit lines, or have no credit cards at all.
Gail Cunningham, spokesperson for the NFCC, explained that the respondents who prefer to use cash are consumers who have reduced credit lines, have credit accounts that are closed, or voluntarily restrict themselves from spending using credit cards.
Americans, who have been burdened with sudden interest rate increase and additional fees, slowed down in using credit cards and changed their borrowing lifestyle as the Federal Reserve released its latest survey that showed that consumers' debt reduced to $86.2 billion.
For the past 12 months, the federal agency said credit card balances were continuously falling.
Analysts explained that the increasing unemployment rate and the banks and financial lending companies' massive reduction of credit lines to its consumers and closure of inactive accounts have caused the drop in credit balances.
In a different survey conducted by the NFCC, the Financial Literacy Survey of 2009 showed about one-third of Americans having no savings.
This survey is consistent with a study conducted by the University of Illinois that said most Americans have an average debt of $46,000 and they only save two percent of their earnings.
Although consumers are determined not to use credit cards for their Christmas shopping, Cunningham said it will be a challenge for the U.S. households, who are suffering from credit crisis. Credit card is the quickest alternative for those who have no cash or who are short in money.
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