Card Analysts Predict Credit Use Will Surge In 2012

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After one of the most tumultous downturns in history, Americans might be returning to their pre-recession spending habits.According to First Data, a service that processes merchants’ credit card transactions, senior vice president Silvio Tavares, told CNN Money that “credit is back in favour.”

Card purchases rose each quarter this year, from 8.2 per cent in the first quarter to 9 per cent in the second quarter and 10.6 in the third quarter.

And the numbers added up at the cash register, too: According to a recent ARG/UBS Post Black Friday survey, Black Friday shoppers used their cards for 27 per cent of their purchases this year, compared to 16 per cent last year.

If the smashing success of Black Friday and Cyber Monday were any indication—retailers cashed in $52.4 billion on Black Friday this year, with the average consumer spending $400—Americans will start 2012 in more debt than ever.

In a recent survey of more than 9,500 respondents by CardRatings.com, a little over a third (36 per cent) indicated they would pay for their holiday purchases with credit, while only 17 per cent plan to pay with their debit card.

“The passage of the Durbin Amendment was the death knell for debit cards,” Card Hub CEO Odysseas Papadimitriou says. “It made the elimination of debit card rewards and the implementation of checking account fees tied to debit card use necessary. It also increased the relative attractiveness of credit cards and underscored the value of prepaid cards as checking account alternatives.”

Papadimitriou predicts credit use will surge over the next year as underwriting standards continue to relax and unemployment declines. Currently, unemployment is at a 32-month low, he notes.

He also attributes credit card’s rise in popularity to the better deals consumers are getting, which has helped them BS themselves into thinking they can take on more debt when they can’t.

“During 2011, there were some amazing rewards credit cards and 0% credit cards being offered to people with excellent credit,” Papadimitriou says. “This won’t change in 2012, as the lesson the Great Recession taught credit card companies about the value of the least risky consumers is still fresh in their minds. If anything, these offers will get even better.”

That’s great news for people with spotless credit reports, but has the rest of America learned its lesson? Given the numbers above, it seems unlikely.

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