Tuesday, December 1, 2009

Consumers Using Cash Instead Of Credit

Consumer behavior seems to be shifting away from using credit cards to make purchases according to a survey reported by Rueters. Also, people who have cash available are able to negotiate large discounts on real estate purchases. See the following post from The Mess That Greenspan Made.

After having spent the better part of the last week in California where credit cards seem to be used for nearly every purchase - from grande lattes at Starbucks to candy bars and giant sodas at the AM/PM - it comes as a surprise to me to hear that a growing number of shoppers are paying cash for their holiday purchases as reported by Reuters.

Cash was king for consumers who shopped over the Thanksgiving weekend, according to survey results released on Sunday, and that factor could have cost retailers additional sales.

Only 26 percent of people who shopped over the weekend said they used credit cards for their purchases, according to a poll conducted for Reuters by America's Research Group.

"That's an amazing shift in consumers' habits," said Britt Beemer, founder of America's Research Group.

A total of 39 percent said they used cash, while the remaining shoppers used debit cards, the survey showed.

Consumers shunning credit cards is a bad sign for retailers, since people who buy gifts with a credit card tend to spend anywhere from 20 to 40 percent more on the gift, Beemer said.

Also on our trip south, while on the I-5 just north of Sacramento - one of the many housing bubble hotspots in recent years - we spotted a sign that probably characterizes today's housing market better than anything I've seen recently:

New Homes for Sale!
Zero Down! Government Program!

We also heard stories of aspiring homeowners losing bidding wars to those making much lower offers but paying cash for foreclosed properties in the $120K to $180K range, what appears to be the sweet spot for the real estate market today. In this case, cash really is king.

This post has been republished from Tim Iacono's blog, The Mess That Greenspan Made.

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