Time for A Credit Rebound (Or Not)

by Ken Paterson 0

The question of the hour is:Is credit card volume up ordown in this holiday season?The answer is clearly yes.

One thing is certain-this year’s holiday shopping seasonis one of contradictions.On one hand, measures of payment systemactivity appear to be positive for credit cards:

In November, year-over-year credit transaction growth was5.4% and dollar volume growth was8.0%.Credit growth was the highest in over a year.Consumers were more willing to use their credit cards to purchasetheir holiday gifts while debit growth rates slowed.

–First Data SpendTrend press release December 9,2010

On the other hand, consumer surveys, the one below byAmerica’s Research Group, suggest just the opposite:

After the Thanksgiving shopping weekend, the group foundthat just about 17 percent were paying with credit – just over halfof last year’s level and the lowest rate in the 27 years it hasconducted a survey.

–New York Times, December 9, 2010

Ironically, they can both be right.More affluent consumers doappear to be spending once again, as do some businesses andcorporations, both of which are contributing to a modest upturn inreported Visa and MasterCard credit payment volumes in the recentquarter.On the other hand, as we have discussed ad nauseum, creditcard accounts on file continue to drop and a wide swath ofconsumers either no longer hold credit cards or are cutting back ontheir usage in favor of debit or cash.

So it seems that just like the economy, the credit card industrycan feel good about being “officially” out of the recession and thefact that those better off can once again spend, whilesimultaneously it must recognize that high rates of unemployment,underemployment, and household financial stressare making therecovery a hollow victory.

Perhaps it is not too much of a stretch to suggest that ascredit goes, so goes the economy.So let’s hope for a better creditcard year in 2011-and of course, the jobs and income to pay thebills.

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