Richard J. George, Ph.D.

Shoppers Choosing Cash Over Credit

December 4, 2009

FROM RETAILWIRE:
There's a view held by many that the effects of the recession will last for many years into the economic recovery. The rationale goes that recent tough times have sobered consumers.... Does a three percent downward shift in credit card usage from last year to this represent a big shift in consumer purchasing behavior?      [more...]

There is no doubt that consumers are recalibrating, focusing more on value as well as values. On the value side, if consumers perceive themselves as richer because they are not paying the associated credit card fees and monthly interest charges, then the switch could be potentially positive. Similarly, if consumers use more cash during the holidays, this may also have a positive impact post-holidays as they will have less credit card debt and therefore may buy something on credit that the may have postponed in years past.

On the other hand, the switch to more cash purchases may reflect a shift to buying only when the consumer has cash available and this would have some negative impact, especially as it relates to impulse purchases. Likewise, it would reinforce the perception that changing consumer values are reflecting the age old directive to "live within one's means."