Consumer Credit Use Rising Again?


Consumers to Retailers – Charge It 07-22-2011

Much has been made of the progress Americans have been making in digging out from underneath piles of debt since the Great Recession began. Frugal consumers are watching their dollars and not letting credit card debt put them in financially untenable positions.

Every month, for example, Target provides an update on its credit card receivables, which has shown steady year-over-year improvement in credit card delinquency rates. In June, only three percent of the company’s cardholders were 60+ days past due. This compared to 4.9 percent in June 2010 and 5.7 percent in 2009. Going through the company’s table, a similar pattern is found for all the other months, as well.

Now, however, it may be that consumers are sliding back. According to research from First Data Corporation, the largest processor of credit cards, credit card volume growth was up 10.7 percent in June, the largest increase in over a year. Volume numbers, according to First Data, are largely driven by inflation.

“Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” Silvio Tavares, senior vice president at First Data, told Bloomberg News. “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problem.”

Discussion questions:  What does the increased use of credit cards mean for retailers? Would it be in retailers’ interests to dissuade customers from credit card use?

My post:

Most of the comments have gone well beyond the simple questions asked.  There is too little data in the articles to divine conclusions on the overall impact of increased credit card usage. The reasons vary from people needing to use credit due to cash running out, using their cards for convenience, the impact of inflation, and more.  What does this mean for retailers?  Credit is merely a means of payment. The answer will vary by retailer and will be more accurately tied to transaction volume and size.  It is certainly not in retailers’ interest, nor their responsibility to dissuade credit card use.  Between consumer education on the downside of overusing credit, to new government efforts to better regulate credit card issuers, consumers are much better equipped to make credit use decisions on their own.

Mike Osorio, your Dare to be Contagious! ™ strategist

What do you think?  Please add your comments and add to the discussion!

Go to the full article at  Consumers to Retailers – Charge It.


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