USA Today reports that on Black Friday, “payments made with credit cards rose 7.4% from a year earlier, vs. an increase of 3.4% for payments with signature debit cards, according to First Data, a payments processing firm. An analysis by Javelin Strategy & Research forecasts that credit card payments for online purchases will increase 63% from 2011 to 2016, vs. 2% for debit cards.
“During the recession, the use of credit cards declined as cost-conscious consumers switched to debit cards and cash for their purchases. Now, though, the pendulum is swinging back, analysts say. While overall consumer debt continued to decline in the third quarter, the number of applications for credit rose for the second consecutive quarter.”
According to the story, there are a number of reasons for the swing toward greater credit card usage.
For one thing, federal limits on debit card transaction fees mean that banks are cutting back on debit card incentives, and switching their attention to credit cards - and consumers are biting. There’s also a gradual loosening of consumer credit by the banks, as well as a growing desire for personal indulgence.
“During the recession, the use of credit cards declined as cost-conscious consumers switched to debit cards and cash for their purchases. Now, though, the pendulum is swinging back, analysts say. While overall consumer debt continued to decline in the third quarter, the number of applications for credit rose for the second consecutive quarter.”
According to the story, there are a number of reasons for the swing toward greater credit card usage.
For one thing, federal limits on debit card transaction fees mean that banks are cutting back on debit card incentives, and switching their attention to credit cards - and consumers are biting. There’s also a gradual loosening of consumer credit by the banks, as well as a growing desire for personal indulgence.
- KC's View:
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Perhaps people are just so worn down by all the apparent bad news about the global economy that they’re saying, “%&@# it, it’s Christmas.”
Certainly good for retailers and marketers in the short term ... especially since we have to have this kind of growth if the economy is ever going to get out of the ditch. But I think we all have to worry that the new growth is being built on a house of cards.
