Shoppers say they're charging fewer holiday purchases this year, citing worries about the economy and job security, rising interest rates on credit cards and higher prices for gifts.
"Last year, I did a lot of shopping with my credit card," said Brandy Murray of the North Side. "This year I didn't use my credit card at all."
Instead, she's using cash to buy presents for family members and a godchild. Although that means buying fewer gifts, this year, she said, "people are mostly worried about what is necessary."
As the Christmas shopping season officially kicks off today, consumers nationwide appear reluctant to load hundreds of dollars in gift purchases onto credit card bills that come due in January.
Those who plan to use credit most often for holiday purchases are falling in number, to 31.5 percent this year compared with 32.3 percent in 2007, the National Retail Federation found in its annual survey. "We are really advising people more than ever not to use credit cards," said Kristen Garrett of South Side-based Advantage Credit Counseling. "And people are aware, more than usual, of the pitfalls."
Partly that's because banks and merchants are raising interest rates on cards, lowering credit lines and shortening payment cycles. Credit.com found rates on some cards rose from 12 or 15 percent to as high as 29 percent, said Gerri Detweiler, a credit expert and adviser for the San Francisco-based Web site, a clearinghouse of information and products.
Bank cards spark the most complaints. Large financial institutions are most concerned about maintaining their profit margins given the bad real estate loans they might carry, she said. Credit union cards fluctuate less, as do department store cards -- though their interest rates tend to be higher.
Consumers need to watch for other changes. "If you charge a bunch and then your limit is lowered, you run the risk of being maxed out on that card," Garrett said, adding that using more than 30 percent of a revolving credit line can damage credit scores.
Kelly Nicholls started holiday shopping this summer and put all her gifts on layaway -- an old option a few major retailers are offering again. Shoppers can be charged $5 to $10, or a percentage of the total purchase price, to pay for items in installments and get them later.
"I don't like to use plastic. It gets you in trouble," said Nicholls, of North Braddock, a single mother with two children.
Cookie Yoder, president of the Pittsburgh Federal Credit Union in Mt. Oliver, said members are withdrawing what they can to spend on gifts with the intention of limiting their spending to those amounts.
They're also saving more. The small credit union's deposits have increased by $750,000 since September, to $7.7 million, she said. That figure accounts for the $91,000 Pittsburgh Federal paid out to members with Christmas club accounts, another old idea regaining popularity with credit unions and some banks.
Though interest rates are small -- Pittsburgh Federal Credit Union pays 0.2 percent -- the idea is to let customers build a stash by setting aside a little money each month for year-end shopping.
"We think they're a great idea," Garrett said, and Advantage's January newsletter will encourage clients to start Christmas clubs for next year's shopping.
This year, shoppers who have little cash put aside should make budgets, compare prices on the Internet before heading to the mall and avoid crowded stores that can cause stress and lead to impulse purchases, she said.
Still, Consumer Reports said 26 percent of shoppers planned to be out today, up 5 percent from last year.
Although many consumers expect to pay their balance in full next month, avoiding finance fees, some will fall behind as other bills appear and jobs are lost or overtime pay is cut, Garrett said.
"If you are carrying a balance, you may want to find ways to cut back or pay cash," Detweiler said. "But if you pay in full, then using your credit card is the safest way to pay."
Jo Ciao of Swissvale is watching sales and clipping coupons. She'll pay for gifts with credit cards but plans to pay off the entire bill when it's due. "I've never paid a penny in interest. I don't believe in that," she said.
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