Americans will try to avoid credit for holiday shopping

While many companies in the payment industry have made attempts to get consumers to more heavily adopt mobile payment options and begin relying on their credit cards once again, it seems that neither choice is in most consumers’ plans this winter.

When it comes to making purchases for gifts in the upcoming holiday shopping season, most consumers say they will stick with payment methods that don’t end up costing them more in the long run, and will similarly eschew emerging payment methods, according to a new survey from the payment processing company Litle and Co. While there is a healthy percentage of consumers who have and plan to access their credit cards in the run-up to the holidays, most will stick to cash and debit to make those purchases.

“Consumers are carefully choosing between using credit or [debit and cash] and it’s no wonder given the current economic climate,” said Ben Saren, vice president of marketing at Litle. “They are making trade-offs between using their available funds rather than credit to defer payment but are evidently swayed by the chance to earn bonus awards and miles.”

More specifics on preferred payment methods

In all, 49 percent of respondents said that they had three or more credit cards in their name, but a slightly greater proportion overall claim they would prefer to use either debit (37 percent) or cash (16 percent) to make their purchases instead of credit, the report said. However, when it comes to larger purchases, specifically those of more than $100, credit is still the preferred payment method for about one-third of shoppers.

Further, a number of consumers, particularly those who are well-off, seem to have some amount of interest in relying on credit because of the rewards benefits these purchases will grant them, the report said. Close to half of the 49 percent of consumers who had credit cards say that the opportunity to earn points, cash back or miles was their primary motivation for making credit card purchases this holiday season. This was especially true for consumers making more than $150,000 per year, of which 73 percent responded similarly.

Mobile not in the cards

However, while many companies in a number of different industries have been trying to encourage consumers to rely more heavily on mobile devices to make purchases, that simply hasn’t been something in which shoppers seem interested, the report said. While 60 percent of respondents have a tablet or smartphone, only a quarter of them have actually made a purchase using it.

And when it comes to those mobile purchases, consumers seem not to want to spend too much on them, the report said. In all, 63 percent of those purchases carried total price tags between $20 and $100.

Beyond that, just 8.6 percent of those polled said they thought mobile wallet technology was going to appreciably change the way in which consumers make their everyday purchases, the report said. And as if to underscore that point, 71 percent said they have never used a mobile payment processing service such as Square when completing a transaction with a merchant.

“Meanwhile, the number of shoppers transacting via their mobile devices is small, and really calls into question the consumer appetite for mobile payments,” Saren added. “For retailers and merchants, these research findings present important insights that should be factored into marketing and targeting plans this holiday shopping season.”

Caution is key for holiday shopping

While many consumers are now more interested than they were in the past in using credit cards again, especially given the effect the improving economy has had on their financial situations, it should nonetheless be noted that the temptation to overspend at this time is very real.
And the effect of this temptation can have on you is usually made clear just after the holidays come to an end: There are typically seasonal upticks in instances of delinquency and even default in the first few months of the year, as consumers fall behind on bills they may not be able to afford thanks to increased holiday spending. That, in turn, can lower borrowers’ credit scores and end up costing them a lot more than the late fees and penalty interest charges in the long run.

If you want to make sure your credit score is as healthy as it possibly can be, making on-time payments and keeping your debt totals down is a great place to start. However, you should also take the time to order a copy of your credit report, and check it over closely for any unfair markings that may be dragging down your rating. If you find any, it may be a good idea to work with a credit repair service to clear up the issue.