Consumers to Retailers: Charge It
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.”
- Credit Card Delinquency Rates – Target Corporation
- First Data Releases June 2011 SpendTrend – First Data Corporation
- Consumers in U.S. Relying on Credit as Inflation Erodes Incomes – Bloomberg News
Discussion Question: What does the increased use of credit cards mean for retailers? Would it be in retailers’ interests to dissuade customers from credit card use?