The Christmas Without Credit Cards

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Have consumers finally learned their lesson? This could qualify as a Christmas miracle. Surveys indicate that the number of shoppers using credit cards for holiday purchases has fallen to the lowest percentage ever since such data has been gathered. That’s a good sign considering that an estimated 13.6 million Americans are still paying off debts from last holiday season.

The reasons for choosing cash or debit over credit are pretty obvious. With cash, there’s a set limit to how much a consumer can spend. Once it’s gone, that’s that. No more toys and gadgets and new purses and silly seasonal pot holders can be bought. Shoppers using credit cards, on the other hand, can find themselves buying stuff regardless of whether they actually have the money to pay the bills. So heading to the mall with a limited amount of cash is an easy way to, well, limit how much can be spent—it’s an automatic cutoff for consumers who know themselves well enough to realize they wouldn’t otherwise stick to a budget.

Besides restricting one’s spending, cash has been proven to make shoppers do what they do in a more thoughtful, more real, and yes, a more painful way. A cash shopper tends to pause and agonize over the decision to purchase or not in a way that credit card consumers do not. And while that sounds like no fun, it’s as good for you as eating vegetables and taking vitamins. (OK, maybe not taking all vitamins, which sometimes are a total waste of money, or what amounts to “expensive urine,” as the net result has been described.) Studies show that shoppers using credit are far more likely to make poor, impulsive decisions they’ll soon regret. Correspondingly, when there’s more “pain of payment”—what shoppers experience through the more tangible handing over of cold hard cash—consumers are better able to curb their impulsive tendencies.

These are the reasons, along with the fact that banks have closed the accounts of millions of cardholders, that many sources have indicated credit card usage is down this holiday season. The NY Times reports that the use of plastic is really, really down:

The lowest percentage of shoppers in the 27-year-history of a national survey said they used credit cards over the Thanksgiving weekend, while the use of general credit cards like Visa and MasterCard fell 11 percent in the third quarter from a year earlier, according to the credit bureau TransUnion.

A survey firm called America’s Research Group offers another stat revealing serious credit-avoidance around Black Friday:

After the Thanksgiving shopping weekend, the group found that just about 17 percent were paying with credit — just over half of last year’s level and the lowest rate in the 27 years it has conducted a survey.

Here’s a little piece of irony, however. Guess what’s expected to be the most popular gift this season? The gift card, the plastic responsibility-free stepchild of the credit card. A National Retail Federation survey has it that 77% of consumers will buy at least one gift card over the holidays.

So while more people are using cash to avoid debt and so that shopping will be more a thoughtful, purposeful, and yes, necessarily painful experience, tons of shoppers will give gifts that enable recipients to make what are bound to be entirely pain-free, thought-free purchases. By one account, shoppers are 2.5 times more likely to pay full price when using gift cards versus cash.

Here’s another factoid that surfaced recently, and that you should consider before handing over another gift card to the cashier: 27% of consumers still have gift cards they received in 2009 but haven’t used.