Debit cards are a popular way to pay and gift cards are making a big splash this holiday shopping season. Meanwhile, national sales on the day after Thanksgiving – traditionally the biggest shopping day of the year – were up this year, although consumers took something of a break during the following week.
Publicity about the heavy loads of debt carried by Americans sprang up following changes to the bankruptcy laws and made consumers more likely to try and spend money they already had, and high energy costs increased that tendency.
“I think that what we see every year Â… is more and more people trying to make purchases [with] their debit cards,” said Susan Coward, senior vice president of electronic banking for Maine-based TD Banknorth.
Most people do not want to deal with big credit card balances come January, Coward said, especially with the possibility of huge heating bills hanging over their heads. However, many big-ticket items are still bought with credit cards, she said.
Lisa Rose, senior vice president and chief information officer of Danvers Savings Bank, said it is difficult to gauge how much people are using their debit cards because the bank has been adding more card holders every year. The bank, however, has seen an increase in debit card use over the past few months, she added.
A spending report from Visa showed that, on the day after Thanksgiving and on the following Saturday, Visa customers spent $3.5 billion on their credit cards and $2.8 billion on debit cards. That represents a 10 percent increase in credit card spending from 2004, and a nearly 21 percent increase in debit card spending from last year.
Bank customers are also showing a penchant for gift cards, which TD Banknorth sells in all its branches. The Visa-branded cards come in a variety of denominations and buyers are charged a fee between $3.95 and $5.95. Because they can be used anywhere that accepts Visa, they are popular gifts for friends and relatives who are difficult to shop for, Coward said.
“[Sales of gift cards] are skyrocketing this year,” she said. “We’re selling a gazillion of them.”
Gift cards are also popular with customers of Danvers Savings, Rose said. Many people give them to friends or relatives who live far away.
“Gift cards are always a popular gift,” she said.
The cards have also been hugely popular with corporate customers, who give them to employees for the holidays, Coward said. And because the formerly popular “Christmas Club” savings accounts largely do not exist any longer, gift cards have taken on a new role, Coward said. During the last couple of holiday seasons, bank employees noticed a new trend: customers buying gift cards and using them on the same day. Some investigation revealed that many customers took money they had saved in traditional savings accounts for gift-buying and used it to buy a gift card, then used the card to buy gifts. Because the money is already in the bank, gift cards can be good budgeting tools.
‘Running Ahead’
Sales themselves have been good. At Salem Five Cents Savings Bank, transactions are up significantly from earlier this year. At press time, the fourth quarter had seen 980,000 transactions, compared to 572,000 in the second quarter, according to Janis Dodge, the bank’s senior vice president of retail banking.
“We’re running ahead,” she said.
It is still too early in the shopping season to make any sweeping statements, she said.
Overall, the day after Thanksgiving, or Black Friday, was positive for retailers. According to the International Council for Shopping Centers, sales at some malls were up between 5 percent and 6 percent over the weekend after Thanksgiving.
Coward noticed the sales boom starting earlier than usual this year.
“People are starting to think earlier about their shopping,” she said.
The holiday season now starts immediately after Halloween and, up until Black Friday, November numbers are typically low. This year’s were higher than last year’s, however, she said. Part of the early start is due to merchants announcing sales and putting out merchandise earlier than normal.
Merchants likely offered the early promotions to combat flat sales of cold-weather items, such as hats and gloves, which have not flown off the shelves due to mild weather. The weather has a lot to do with projections for the rest of the holiday season, according to Patrice Duker, a spokeswoman for the International Council of Shopping Centers. Cold weather is good for the sales of seasonal items like hats, but if a snowstorm hits on a weekend near Christmas, it could push consumers to find alternatives, like online shopping.
But the weeks leading up to Thanksgiving were no match for Black Friday and the weekend that followed it.
“Black Friday is still Black Friday,” Coward said.
The bank geared up for the big shopping day by making sure all customers’ cards would work and that all ATMs were functioning. The day itself was pretty typical, Coward said.
Spending on Visa cards increased 15 percent on the Friday and Saturday following Thanksgiving, according to a report from Visa.
“Consumers don’t appear to be suffering from a Black Friday hangover as spending on Visa-branded credit and debit cards remained strong on Saturday,” said Wayne Best, senior vice president of business and economic analysis for Visa USA, in a prepared statement. “For Saturday, spending on Visa cards reached nearly $3.2 billion, a 16.4 percent increase over the same day last year.”
Visa predicted in late October that the sales for the holiday season would be moderate to strong.
“Currently, our economy is on good footing and should remain steady in the coming months. As consumers continue to feel good about their financial situations, bolstered by sustained wage and income growth, it should translate into a good holiday season for retailers,” Best said in his statement. “Much will depend on whether Americans will see fuel and oil prices start to level off – or even decrease – giving consumers access to more disposable income, in time for the holidays.
“Americans are looking for value and have become increasingly savvy at finding a good deal on the Internet or at traditional retail outlets. This is especially true when it comes to holiday travel – consumers are looking for, and booking, their holiday transportation a lot earlier this year.”
Online shopping will be more popular than it was last year, according to a survey conducted by The Conference Board.
The survey showed that about 34 percent of all consumers will buy holiday gifts on the Internet, up from 33 percent a year ago. Books are the most popular gift to buy online, with nearly 45 percent of respondents saying they will buy books as gifts. Clothing and shoes rank next as online holiday buying choices, followed closely by toys.
Of the 33 percent who said they purchased holiday gifts last year on the Internet, 94 percent said they were satisfied with their online buying experience.
Overall, the International Council of Shopping Centers predicts that holiday sales in November and December will rise by 3 percent to 3.5 percent.
“If that holds true, it will be a moderate retail season overall,” Duker said.
Retailers who can compete on price are likely to do well this season, she said, as is the other side of the spectrum: merchants who sell luxury goods. The luxury market is trending toward a rise of 7 percent, Duker said.
