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Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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Will Credit Cards Fuel Holiday Spending?

Credit card use is on the rise. What does this mean for holiday spending and the American consumer?

| BY Adriana Reyneri

If the past is any indication, American consumers will be using credit cards to finance a bigger share of their purchases this holiday season.

Average credit card debt rose 4.9 percent in third quarter of 2012 compared to the same period last year, according to a report released today by TransUnion, an information and risk management company tracking consumer spending trends.  Americans now carry an average of $4,996 in credit card debt, a .5 percent increase from $4,762 for the second quarter of 2012.

Higher delinquency rates have paralleled the increase in borrowing, are may be partly due to a larger share of borrowers with sub-prime credit ratings, TransUnion said. The share of borrowers 90 or more days late with payments rose to .75 percent in the third quarter of 2012, up from .63 percent in the second quarter and .71 percent in the third quarter of 2011. Non-prime borrowers accounted for nearly 30 percent of new credit cards issued in the second quarter of the year, compared to 23.86 percent in the second quarter of 2010.  

Credit card debt patterns in 2012 are mirroring those for 2011, with a decrease in the first quarter followed by two increases over the next six months, Ezra Becker, vice president of research and consulting for the TransUnion financial services business unit. “With both delinquencies and debt levels remaining quite low relative to historic norms, we are confident in the continued stability of credit card usage patterns in the short term.”

The National Retail Federation anticipates a slightly smaller increase in holiday spending this year, predicting consumers will spend 4.1 percent more this season compared to last. The average holiday shopper is forecast to spend $749.51 on gifts, greeting cards and decorations for a total exceeding $586 billion. In a mid-October statement, the federation described American consumers as cautiously optimistic.

The likelihood to spend more this year varies considerably by household wealth, according to a monthly survey conducted in September by Millionaire Corner. Households with less than $100,000 in investable assets were more likely to reduce than increase their spending. While roughly 9 percent said they planned to spend more this year, more than 27 percent said they planned to spend less. Their reasoning? More than half (53 percent) said they had less disposable income. One-third said they believe the economy is getting worse and 27 percent said they were worried about their economic situation.

Investors from households with $1 million in investable assets indicate more willingness to part with their money. Fourteen percent of Millionaires indicated they would spend more, compared to 10 percent who said they would cut back on their holiday spending.