You folks posted alot of good comments yesterday following the discussion on increased Credit Card usage in the mixed retail post. Enough issues were raised that I tracked down some people at Visa to get a breakdown of the specific data regarding card usage over the weekend:
Spending on Friday/Saturday with Visa branded cards was over $7.068 billion dollars; This represents a 15% increase versus 2004.
• $3.84 B was consumer credit;
• $2.82 B was debit/check cards;
• $400M was Visa Commercial/Small Business cards (a form of commercial credit).
That means approximately 54% of the increase in card usage was added consumer debt.
Another interesting data point: E-Commerce was $544 million, a 32% increase from 2004. That number is consistent with the past 5 years of growth online. Note, however, that online purchases are a mere 7.6% of total retail sales.
Also, Travel spending was up 19% to $974 million — reflecting in large part increased energy costs for airlines and autos.
Note that these are actual sales receipts, and not opinion or
expectations of spending. Its is therefore a significant data point.
UPDATE November 29, 2005 10:49am
Here is the Visa data release
I work for a pretty large general merchandise retailer (2+ billion annual sales) and for what its worth, we are recording a 13.9% sales increase over the 3 days (Fri-Sat-Sun). But interestingly, our customer count was down 2.8% while the average ticket was up 17%.
It would be interesting to see the same breakdown one year ago. That way, we can determine what is the driver of the overall increase in Visa transactions. Is it coming from debit/checkcard transactions or credit transactions, or both (probably)?
If online sales were up, would it not also drive an increase in credit card usage? Most online transactions require either a debit or credit card and many choose credit cards because it may be easier to contest charges. I would suspect this mindset would certainly be true of first-timers.
Great work on this Barry. But I wouldn’t assume that all funds charged on consumer credit cards necessarily will result in added debt. Many people, including myself, use credit cards to fund purchases but do not revolve balances (in other words I pay the full balance at the end of each month). I think you are focused on the right things, but I would be surprised if all of this revolves. As several commenters have pointed out, affinity programs by the card issuers have resulted, among other things, in a migration to card usage away from cash/checks. We’ll see the data in the G.19 report from the Fed, but unfortunately it is so lagged we won’t see the November data until first week of January 2006.
I am not sure that you can peg the entire increase in visa use with increased consumer debt. I know that my spending habits have changed over the past year because of the proliferance of credit cards that give me cash back. I am not saying that your hypothesis is not correct, just that there are many people I know that put EVERYTHING on their credit card now vs. a year ago. That could be part of the increase.
I agree with Joe, my credit card has turned me into a cashless consumer. I pay the balance every month. Is there any way to prove that mortgage cashouts simply went to the mall? surely a lot of that money was put to more productive use.
Remember that most of the readers of this blog are financially savvy people. We are clearly not an accurate cross-section of US consumers.
I suspect that Barry is correct in his assessment that many of these Credit Card purchases will become revolving debt. Here’s why:
The average US savings rate is negative, and has been for the past three months. The *average* (not necessarily poor) US consumer is becoming over-extended, and has *nothing* saved for a rainy day, let alone set aside for Christmas.
Also bear in mind also that “average” includes those who otherwise appear to be well-off – People who have new sport-utes, RV’s and motorboats, and lots of expensive presents under the tree :)
Thanks for looking all this info up for us… but I have one caveat for the data. Just because 54% of the transactions are credit doesn’t mean the 14% increase in use correlates as directly to the debt side.
If your people at Visa can get you last years credit and debit numbers, that’ll give us the true picture.
Anecdotally… Online I use one-off cards. Citibank offers the ability to generate one-use credit card numbers for purchases. It allows you to set a maximum amount, to prevent being overbilled, and also expires after 1 month.
This feature is new in recent years, and doesn’t exist on the debit side of Visa/MC. Since I do more online shopping, my use of credit this year is higher than in the past. However, my total outlay is likely to be slighly less than last year.. and the wife and I are now in the habbit of paying the card online as soon after the purchase as possible… so it’s like safe-online-cash more than credit.
My next question about this very useful data set is the number of VISA cards in play, or at least the average/median or some distribution information on purchases, for could this data set simply be due to VISA taking marketshare for ATM/Credit cards from Mastercard, AMEX or who knows who else. I don’t know this information, therefore it makes me question a couple of things.
On a side note, this Christmas looks like it will be a completely cash Christmas for my wife and I just to keep our spending under control.
No one writes checks for their groceries or to buy gas anymore. You have to show multiple forms of ID, you have to write your SS# and drivers license number on each check, and you’re treated like a thief from the instant you take out the booklet. Much less invasive and much less paperwork to just swipe the CC.
And this isn’t just “finacially savvy people”. Unless suddenly *everyone* who shops at Safeway and Trader Joes has suddenly become finacially savvy. Grovery stores, gas stations and other retail outlets got tired of being ripped off by bad checks. They’ve purposely channelled customers into paying by CC instead of by check over the last five years.
I’ve tied multiple monthly utility bills (cell phone, internet) to my CC. And buy all my groceries, gas and other basics with my CC. Last year I paid 25k through my CC, yet paid in full every month and never paid any finance charges. Instead of writing 50-70 checks a month I wrote one check to Mastercard.
This rechanneling of payment streams though CCs instead of checking accounts is not an increase in consumer debt. What’s needed is the monthly carryover amount from these companies ie. the amount not paid in full.
Blackwood: Where I live there are several retirement communities around, and the area generally has a good percentage of elderly dwellers. I can tell you that lots of checks are being written, and dimes/pennies counted, when they do their grocery shopping. OTOH they probably shop fewer times per month, or during daytime, and so may be underrepresented later in the day.
And of course merchants want to maximize the amount of “safe receipts”, not necessarily minimize check transactions (?). To that end they are probably successful.
The data point is interesting and factual but not complete enough. In order to say something about the 15 % increase in card usage, you will have to compare the breakdown of this year with that of last year.. and then calculate the differences. To assume that the split in total usage = split in increase in usage is… merely assuming..