With holiday spending in full swing so is its evil stepsister, credit card spending. Recent stats by the National Retail Federation show that the 2007 holiday season is off to a record start with recent “Black Friday” sales by US shoppers rising 8.3% to a record $10.3 billion. Figures for the following “Cyber Monday” shopping holiday, the Monday following Thanksgiving, also showed a healthy increase with a new one-day record of over $700 million in total purchases.
Unfortunately, most of this record consumer spending was paid through the use of credit cards. Most consumers don’t hesitate to place $300 in goods on a credit card but certainly would think twice if they were forced to purchase the same amount of goods solely with cash? It is thus no surprise that the average credit card debt per US household was $9,659 at the end of 2006 and is expected to rise yet again in 2007 as it has every year since the early 1990’s.
What will this rampant spending mean for the New Year? According to John Silva, chief economist for Wachovia, “(Consumers) will still be spending money (in 2007) but it will be on credit card interest and minimum payments, not on apparel or eating out.” Silva actually believes that the US economy may be heading towards recession in 2007 and puts the odds of such an occurrence at about 30% — certainly high enough to make most in the financial industry more then a little bit nervous.
What does this mean for you the consumer? Add in the continued price of $90 oil, the slide of the home housing market, an increase in the price of milk and the constant slide of the price of the US dollar abroad, and you get a continued difficulty for the average American both home and abroad in 2008.
We all want to give the best we can to our loved ones during the holiday season but doing so at the risk of your future financial sanity, may not be the best way for you to approach your holiday shopping this year.
Remember! If you feel hesitate buying that purchase with cash, maybe you shouldn’t be buying it in the first place. Your 2008 credit card bill may just thank you.