Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, December 28, 1993 TAG: 9312280110
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
Economists said the sharp rise in credit-card use during the crucial shopping period reflects growing consumer confidence in the economy, aggressive marketing by credit-card companies and more big-ticket sales.
Consumers also are taking out more loans for cars and other purchases.
"It's quite a welcome development for the economy," said Sandra Shaber, an economist at WEFA, an economic forecasting and consulting firm in Philadelphia.
Visa reported a 32 percent jump in retail spending on cards between Thanksgiving and Christmas from the same period last year. MasterCard said its volume of charges cleared through retailers soared nearly 24 percent.
Both companies said the number of cards issued in the United States has increased from last year, but not enough to explain the surge in purchases.
MasterCard, for instance, said individuals on average reached for plastic 10.3 percent more often during the first half of the year.
"People are using their cards more," said Nancy Maffucci, a spokeswoman with MasterCard International, based in New York.
The trend illustrates a growing consumer willingness to pile on debt after the two years of reticence that succeeded the spendthrift 1980s.
Installment debt totaled $776.7 billion in October, the latest month for which Federal Reserve Bank figures were available - up about 5 percent from the 1992 total and nearly 7 percent from 1991.
During those two years, consumers were busy paying down debt accumulated during the 1980s.
"Consumers had been paring their debt, so they felt better about spending this year," said Albert Coscia, a spokesman at San Francisco-based Visa USA.
Consumer debt is still far below its peak of last decade. The debt-to-income ratio - a measure comparing consumer debt to disposable income, excluding mortgage loans - is 16.2 percent. It was about 19 percent before the recession began in 1990, Shaber said.
The increase in credit-card use also reflects the marketing tactics of card companies vying for customers. Many are offering incentives such as discounts from the price of purchases for consumers who charge the most.
In addition, Shaber said, consumers tended to buy pricier gifts such as computers and home appliances this holiday season, and people generally don't carry enough cash to pay for such big-ticket items.
"Those sort of things do drive cards more sharply," Shaber said.
Another report on Christmas spending estimated December sales rose 8 percent to 9 percent higher than a year ago, against last year's 11 percent gain over 1991 levels.
The numbers came from Ed Johnson, director of Johnson Redbook Service, which surveys sales by department stores, chain stores and discounters each month. The agency is scheduled to release its December retail indicators today.
Johnson said he doesn't expect sales the week before Christmas to have risen as much as last year's 29 percent. However, John Ryding, an economist at Baer Stearns, said that week's sales have been up at least 20 percent for the past several years.
Knight-Ridder news service contributed to this story.
by CNB