Reports show surge in credit card use for 2011 holidays

Posted by Sofia Ballow | Posted in Credit Help | Posted on 17-01-2012

It now looks close to certain: the 2011 holiday season was the time when many Americans once again fell in love with their credit cards, at least according to a Dec. 27 report in The Washington Post.

Credit card use surges

The Posts piece cited support from two sources for its contention. First is appropriately enough First Data, a research company that tracks how consumers make payments. It found that, compared with the same period in 2010, credit card purchases increased by 7 percent in November, and then surged again in the first part of December. And it went on to quote Ed Ferrell, director of the Consumer Reports national research center:

If past behavior is any predictor, the closer you get to Dec. 25 the more likely youre running into that store and buying whatever you can. Plastic really starts flying more.

The second source was an earlier study by Consumer Reports itself. This found that, although the number of consumers who said they were planning to use credit cards over the holiday season remained steady compared with last year, the amount they intended to charge to those cards had increased by 6 percent. On average, respondents thought theyd add $756 to their card balances this year.

Credit card debt remains an unknown

Of course, a large proportion of those using plastic are likely to pay down their balances in full when their next monthly statement falls due. But some wont, and its the number of those that credit card companies and other industry observers will be watching carefully.

Stand by for close scrutiny of data from many private and public bodies as they report over the coming weeks, and especially of the Federal Reserves figures for total credit card debt, which are due to be released in early January for Novembers balances, and early February for Decembers.

Credit card debt and consumer confidence

Two questions many people are likely to ask themselves when they come to decide how much they should reduce their holiday card balances are:

How secure do I feel in my job?
How confident am I in my financial prospects?

The answers to both these may be more cheerful now than they have been recently. Everyone knows that the unemployment rate has at last begun to fall, and the optimism that comes with this was reflected in The Conference Board Consumer Confidence Index, which was published Dec. 27. Lynn Franco, director of the Boards consumer research center, observed in a statement that day:

Looking ahead, consumers are more optimistic that business conditions, employment prospects, and their financial situations will continue to get better. While consumers are ending the year in a somewhat more upbeat mood, it is too soon to tell if this is a rebound from earlier declines or a sustainable shift in attitudes.

Credit card interest rates a factor

People who are considering carrying forward balances for the first time since the credit crunch should bear in mind one factor beyond their immediate prospects: the credit card interest rates they pay may be higher than they used to be. Right now, the IndexCreditCards.com rate monitor puts the average for all cards at 16.71 percent, while those for rewards credit cards average 17.58 percent.

Its that higher rate that lies behind a piece of advice thats oft-repeated here: charge to rewards credit cards only those purchases that you can clear at the end of the current billing cycle. Everything else should go on low interest credit cards.

How much interest will I pay?

Of course, even relatively high rates are unlikely to prove a serious problem for those thinking of paying down their holiday spending over two or three months. But anyone planning to carry credit card debt over the long term should probably take the costs of doing so seriously. So, if youre in that position, why not check out this sites credit card calculators, which can answer a range of questions, including How much interest will I pay?

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