Holidays Offer Clear Glimpse of Consumer Attitudes Towards Credit

For credit card companies, the holidays opened with Black Friday, a time of increased purchases from consumers. The holiday season is a time when card companies see an increased number of credit card transactions as American consumers buy presents for their loved ones and for themselves. The holidays this year offer a crucial glimpse to credit card companies of consumer attitudes towards credit.

Many surveys and studies have shown that consumer attitude towards credit has drastically shifted. According to a survey from trade group, National Retail Foundation, a larger number of holiday shoppers are going to be opting to pay with cash this year. The expected percentage of shoppers who are going to use their cards for purchases this holiday season is expected to drop 10.2% compared to last year's figures which was 31.5%. Debit cards, on the other hand, are seeing a lot of action and consumers using debit cards for purchases are expected to increase as the holidays continue. However, debit cards earn credit card companies far less than credit cards do.

A drop in profits or revenues for credit card companies and firms this holiday season may not only be caused by the choice of a majority of consumers to use cash. According to a survey from Visa, consumers are going to be spending less this holiday season. The survey showed that consumers planned on spending 20% less this holiday season than they did last year.

Surveys and studies cannot match data culled from retailer sales this holiday season however, which is why credit card companies such as Discover, American Express, Capital One, JPMorgan Chase, Citigroup and Bank of America and credit card payment processors, Visa and MasterCard are looking intently on how consumers spend this holiday season. These companies take their income from fees that stem from credit card transactions. The higher the number of credit card transactions that go through this year, the larger the profits that these companies take in.

If the holiday shopping season shows that consumers continue to be timid about spending, credit card companies are going to have to gird themselves for profit losses by the end of the year. However, an increase in consumer spending would mean a more positive outlook for credit card companies as the year ends.

Aside from trending consumer confidence, looking at the holiday season spending trends also helps credit card companies and firms scrutinize their risks as consumers strapped for cash often use credit card purchases, which usually bring them further behind on their debt payments.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.