The story below caught my attention. An early sign that things are getting worse for consumers. When you notice a noticeable uptick in credit card use in a down economy that means that more people are running up debt when they can’t afford to pay. Yikes!

POLK COUNTY (Bay News 9) — During these tough economic times more Americans appear to be turning to plastic when they’re making purchases, and business owners are noticing.

Crowder Brothers Hardware has sold hammers and nails to people in Polk County for three-decades.

And while many small businesses are struggling, their customers keep coming in.

“You can put off buying a new car or some new clothes,” said Bruce Phillips owner of Crowder Brothers Hardware. “But if your toilet is leaking you don’t have that option of saying, ‘well we can let it go — we’ll fix it in a few months.’ So, we’re fortunate there.”

Phillips says the biggest change he’s noticed through the years is that his cashiers now swipe more credit cards than they count cash.

“We’ve probably seen credit card usage go from 30 percent up to now 50 and 60 percent,” Phillips said.

But as more consumers get used to swiping, more are finding themselves in the red.
Americans now owe an estimated $850 billion in credit card debt, which is four times as much as in 1990.

Consumers aren’t the only ones affected by the increase. Small business owners like Phillips say they’re also paying a price as the popularity of plastic rises.

“Cash is king,” Phillips said. “Credit card — we pay a percentage to have those processed and that affects our bottom line profit.”

The Consumer Federation of America reports 58-percent of people with credit cards do not pay their balance in full each month.

Watch video.

Source: Business noticing increase in credit card purchases

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Read the full article at GetOutOfDebt.org, click here: Business Noticing Increase in Credit Card Purchases. Not a Good Sign.

Yesterday I wrote about a little old hardware store that had noticed an increase in card purchases over cash. That’s not a good sign if people are using plastic more for routine things and especially in this environment of credit card issuers reducing credit limits, raising interest rates and closing cards.

You see, the credit card issuers are getting freaked out that more people are going to start using the cards when they can’t afford it. Shocking! I guess that’s okay when you can limp along and make the monthly minimum payments but otherwise it is a bad thing.

The credit card message has been “use the card, use the card, use the card” but that pendulum is swinging to “don’t use the card, don’t use the card, we’ll take that card”.

Apparently this trend is not limited to just the United States or just hardware stores. A story in India noted:

Usage of plastic money is increasing with times but at the same times it is also increasing the worries of credit card companies. In September 2008, the transactions done through credit cards went up by nearly 20% against the previous month. Normally this would be a reason to cheer for the card companies but presently it has become a cause of concern.

The credit card companies are worrying because they think that rising usage of credit card may also result in higher number of defaults among these users.

If all of this is true, which it is, retailers are going to be hating life this holiday season as credit card issuers start closing cards to avoid even higher losses. Without available cash or loose credit, consumers won’t be able to go overboard on holiday spending.

I’m thinking we need a joust between banks and retailers. Wouldn’t that be fun to watch?

Other Related Articles to Read

• Consumers Feel the Next Crisis: It’s Credit Cards
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• Credit crisis hits even people not late on bills

Read the full article at GetOutOfDebt.org, click here: Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas