Preparation for the holiday season comes well before the first holiday song is played on the radio or the first television commercial for the “must have” gift is ever seen.
While consumers are thinking about the upcoming season the financial ramifications of seasonal holiday purchases also lingers in the back of their heads. The holidays tempt shoppers to use credit without regard to the financial consequences waiting in January after the holidays. Despite current economic conditions, most industry experts are not expecting dampened credit card use.
Purse Strings Loosening Again
According to latest national survey results, consumers are less concerned with finances than they were in 2008. Despite still being in the midst of one of the worst recessions in our history, credit card use for the upcoming 2009 holiday season will remain strong. In the early part of 2008 according, travel-related expenditures were down sharply, primarily due to increased fuel prices but also because of a large number of layoffs and general economic instability. During holiday times, regardless of the economy, travel for some is an essential part of the holiday season. Special holiday meals, airline tickets, lodging and those extra gifts for distant family members are among those purchases often put on credit cards.
Consequences of Holiday Spending
Those who do plan to use credit cards during the season should exercise extra caution. Getting ready for the holidays should also mean preparing for the consequences of holiday spending that will occur during the season and the payments thereafter. The holidays are a good time to reconsider your current credit card. Consumers with good financial history have the opportunity to shop around for low interest rate cards that have lower fees and less miscellaneous costs and apply for a card that will provide the best service. Just as shoppers should avoid impulse buys at holiday times shoppers should always use caution when opening credit card accounts during the holiday season.
Risks of Store Credit Cards
Typically the supply and demand for store credit cards increases during the holiday season. Consumers sign up for the card on impulse, typically because of the enormous savings they are promised at the checkout counter. Even for the most conscientious shopper it is difficult to say no to save 10 percent off when making a $1,000 purchase. It is estimated that the interest rates of the average department store credit cards well exceed those of bank issued cards such as American Express or Visa. Typically store card rates can exceed 20 percent. Consumers often don’t realize the 10 percent you save by signing up is doubled by the interest rate of the first purchase. In addition to the financial risks, department store cards are usually managed through third parties. Third parties frequently share personal information by the nature of their business, which increases consumer risk of credit card fraud and identity theft.
Most shoppers will claim that they intend to minimize their spending during the holiday times in an effort to cut costs. According to general survey results however, most consumers will go over their planned holiday budget by more than 10 percent. Even the best intentioned shoppers fall into the credit card trap at holiday time. Overall the number of credit card users has not decreased. Additionally the number of consumers that are concerned about holiday spending, gas prices and food costs has also decreased. Saving money is always a priority and typically consumers approach shopping with a level of conservatism. It appears that the overwhelming fear of the recession continuing because of a consumer spending freeze will not be a major issue for the 2009 holiday season.