Holiday Spending To Crater As Retailers Clamp Down On Credit

Tighter financing terms are coming to a retailer near you. Combine that with tighter credit card terms and few if any other places lending broke consumers money, and the Grinch looks set to take this one.

Bloomberg: Home Depot Inc., Sears Holdings Corp. and other retailers may lose as much as 8 per cent of their holiday sales this year because lenders and stores are clamping down on financing.

Almost a quarter of shoppers say banks cut the spending limits on their credit cards, according to a survey by America’s Research Group, which also provided the sales-loss estimate. More people are being rejected for new cards, hurting sales for bigger purchases...

“Banks just don’t have the money,” said David Bassuk, a New York-based managing director at consulting firm AlixPartners LLP. The tightening credit is putting retailers “at big risk to lose those sales or lose those customers,” he said. “There is a big concern there with the holiday spending.”

U.S. consumer spending, the biggest part of the economy, tumbled in September, and a purchasing managers’ survey showed the biggest deterioration since 1968. That foreshadows a deeper slump for gross domestic product, which contracted at a 0.3 per cent pace in the third quarter.

About two-thirds of holiday purchases are made using credit cards, estimates America’s Research Group Chairman Britt Beemer

Beemer predicts holiday sales will decrease at least 4 per cent, the first decline since he started forecasting in 1979, as consumers grapple with sinking home and stock values…

Retailers that offer zero- or low-interest financing –which is often backed by banks — may also rein in the credit they extend to shoppers to avoid being left with bad loans when customers can’t pay them back.

If financing is “offered, it’s going to be to a much smaller segment of the population,” said Red Gillen, a senior analyst at Boston consulting firm Celent LLC. “It’s great to attract customers with these financing deals, but you don’t want to be holding delinquencies.”

See Also:
Broke Consumers Hit Credit Cards For a Few Last Pennies
The Coming Credit Card Bust

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.