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Consumers Worry About Rising Holiday Credit Card Balances

credit-card-11112802 Credit: Dreamstime.com


Consumers are worried about going over budget this holiday shopping season, but that isn't stopping them from ringing up credit card debt. That's the conclusion of three separate surveys that find that American consumers are again using their credit cards to shop after years of declining usage.

"After several years of declining use, credit cards are poised for resurgence," said Beth Robertson, director of payments research at Javelin Strategy & Research, a global financial services industry research firm. "Despite the nation's very rocky economic recovery, consumers appear to have halted their belt-tightening and bank incentives to use credit cards rather than debit are gaining appeal."

Part of the reason for the increased use of credit cards is the growth of online sales in the U.S., which Javelin estimates will rise by 16 percent to $309 billion in 2011 and are forecast to climb to an estimated $444 billion by 2016.

The increased use of credit cards is expected to generate higher consumer spending, which could put consumers in financial hot water after the holidays, according to Javelin.

"Frenzied purchasing periods such as Cyber Monday can cause consumers to throw cautionary spending patterns to the wind and take advantage of the 'deal' phenomenon," Javelin noted.

Javelin’s research shows that consumers spend more money on a single online transaction using credit cards than when using other payment options, spending an average of $82.10 with a major credit card versus $58.29 using a major debit card.

American shoppers seem to be concerned about this fact, according to another survey that finds that 24 percent think their credit card balances will rise following the holiday season. That number is up from 19 percent in 2010.

"It seems that consumers have been saving up to spend during the holidays," said Carrie Coghill, director of consumer education for FreeScore.com, a credit monitoring and management service, which conducted the survey. "However, it is key that consumers not overextend themselves. Only buy what you know you can pay off in the first quarter of 2012. Remember, if you miss a credit card payment, it can lower any one, or all, of your credit scores, which can cost you when you need to borrow,” she said.

Consumers are already worried about overspending, according to a third study, this one by The Western Union Co. The research, which was sponsored by Western Union and conducted by Wakefield Research, shows consumers consider overspending their No. 1 worry this holiday season.

And while 69 percent of those surveyed plan to make a holiday budget this year, 62 percent said they would spend more than they have budgeted if it means finding the perfect gift.

Jeanette Mulvey

Jeanette has been writing about business for more than 20 years. She has written about every kind of entrepreneur from hardware store owners to fashion designers. Previously she was a manager of internal communications for Home Depot. Her journalism career began in local newspapers. She has a degree in American Studies from Rutgers University. Follow her on Twitter @jeanettebnd.