Current economic, political climate leads to lower credit card usage
Current economic conditions have had a profound impact on consumer spending habits across the U.S. In fact, recent data from the Federal Reserve indicates many Americans are reducing credit card usage and instead using more traditional transaction methods such as checks and cash. While consumer spending continues to grow at a relatively slow pace compared to years leading up to the Great Recession, supermarkets, drug stores and other essential retailers can benefit from investing in a single device that processes cash and checks, as shoppers make these types of transactions.
Increase in consumer debt, but lower credit card usage
Fox News reported the most recent data from the Federal Reserve reveals a peculiar trend in the current U.S. economy. For example, Americans increased total borrowing by $13.6 billion in August, sending current levels to a record high of $3.04 trillion. Borrowing also grew during July by more than $10 billion.
While an increase in borrowing may normally suggest greater credit card usage among U.S. consumers, these most recent trends have more to do with the financing of big-ticket purchases, according to The Wall Street Journal. Non-revolving debt, which the newspaper said mostly includes automotive and student loans, increased by $14.51 billion in August.
Fox News said the decline in credit card usage has actually caused a substantial decrease in credit card debt, dropping from $883.4 million to $850 million between July and August.
Effects of politics
In addition to economic conditions, the current political climate is likely to have a major impact on shoppers' decisions to avoid credit cards and instead make essential purchases with cash and checks. WDTV, a local CBS affiliate based in North-Central West Virginia, recently reported the ongoing debate over raising the debt ceiling may even lead to an increase in interest rates.
CNNMoney said that while even though Congress has approved a measure to temporarily extend borrowing until Feb. 7, 2014, there will likely be an entirely new debate over debt as early as March that same year. As a result, consumers may be even more reluctant to use credit cards in the event that interest rates in do increase.
"Any time you have a balance on your credit card, any interest rate increase is going to hit you in your wallet and you're going to have less money to spend," Bill Hardekopf, CEO of Lowcards.com, an online resource for credit card information, told WDTV.
Supermarkets and other retail organizations that are typically less sensitive to consumer spending behaviors can utilize cash and check scanners to handle expected increases in the amount of traditional transactions processed over the next several months.