Retail boom this holiday?

Thanksgiving is behind us, and we have had our annual reminder of why “cold turkey” was chosen by addicts as a term to describe what they regard as a form of torture. Now the holiday season is truly upon us.

The National Retail Federation® (NRF) has already released the results of its survey about trade on Black Friday, and they make cheerful reading for economists, stores and credit card companies. Over the long weekend (Thursday-Sunday), 212 million Americans went to stores or websites for shopping, up from 195 million last year. And they spent an estimated $45 billion. That’s an average of $365.34 per shopper, compared to $343.31 during the same period in 2010.

Credit card use down?

Actually, it may be premature for card issuers to celebrate just yet. A different NRF survey, published November 16, found that an increased number of Americans are planning to use cash or debit cards for their holiday shopping this year, and that consequently credit card use could be down.

Of the respondents to the 2010 Holiday Consumer Intentions and Actions survey, conducted by BIGresearch, only 27.6 percent said that they would be using their credit cards to charge purchases, the lowest figure since 2002. The NRF’s president and CEO, Matthew Shay, thinks this may reflect a new level of responsibility among consumers. He observed: “Many families may choose to leave credit cards at home as they shop this year, making sure to only purchase what’s on their list and within their budget.”

And he may well be right. However, there are two reasons why the actual outcomes may be different from the survey’s indications. First, people often tell researchers what they think their questioners want to hear, and in 2010 it’s fashionable to be seen as prudent. And, secondly, consumers frequently start out at this time of year with good intentions, only to be seduced into spending more than they planned both by irresistible bargains, and the holiday spirit. We’ll see how things turn out in reality when the actual figures are published in the new year.

Prepaid credit cards–some benefits

Yet another NRF survey suggests that consumer purchasing online could be more popular again this holiday, at least if retailers get their way. Apparently, 88.2 percent of shopping websites were planning special promotions for Cyber Monday (today). However, many credit card users remain worried about parting with their card details in cyberspace, and some of those prefer to use prepaid cards, which may limit their exposure to fraud.

This is a perfectly sensible plan. You’re unlikely to endure much financial loss if your card details are misused, but there could be plenty of hassle, which may be the last thing you need at this particularly busy time of year.

Prepaid credit cards–some dangers

However, not all prepaid cards are the same. Indeed, ABC News ran a story Saturday about one such card that had been attacked by Richard Blumenthal, the Connecticut attorney general and a senator-elect. He was quoted as saying that this particular product was:

…laden with pernicious and predatory fees that swallow card value. These cards are feckless financial tools designed to promptly diminish in value with virtually every transaction–and even when consumers don’t use the card at all.

The card Mr. Blumenthal was referring to is far from unique in the prepaid card market, and great care should be taken in choosing one. Always make sure that you read and understand the small print, and that the card’s terms and conditions suit your personal requirements. You could begin by checking out the AccountNow® Prepaid MasterCard® or the ACE Pink Visa Prepaid Debit Card.

Published 11/29/10 (Modified 04/23/12)