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Black Friday shoppers weigh using cash versus credit

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A few years ago, Don Levy noticed a change in the world of consumer spending. “I remember it was common for people to write a check at the store,” he said. People would stand in line waiting patiently as they watched a person get their checkbook out, find a pen to write up the amount, show ID and complete their purchase.

Levy, director of the Siena Research Institute (SRI) in Loudonville, said now that way of paying for things is unusual. “People run their cards through the omnipresent swipe machine.” It’s a big shift in consumer behavior, according to Levy, one that many are monitoring as the much-anticipated shopping season is underway.

Black Friday didn’t exactly kick off the holiday spending season this year, as shoppers were introduced to Gray Thursday. Some stores opened on Thanksgiving hoping to lure shoppers away from the dinner table with big savings on the season’s popular items.

In many ways that option has paid off. A National Retail Federation survey revealed 247 million people shopped in stores and on websites over Black Friday weekend and spent an estimated $59.1 billion. Throughout the state, retailers are reporting shoppers were not deterred by Hurricane Sandy, either. Seventy-four percent of store owners surveyed by the Retail Council of New York State said their numbers fared better than last year.

Levy still is hesitant to give the numbers the thumbs up, believing those retail numbers have to be taken “with a grain of salt.” Levy added, “People aren’t running into the mall with $100 bills falling out of their pockets.” He said in fact most shoppers are buying “practical items” like clothes or a washer and dryer.

But this year, shoppers are also trying not to overspend and keep debt down. “Eighty percent (of those polled) say they intend to pay off credit purchases immediately,” he said. Carrying a heavy credit card balance is not a trend New Yorkers want to continue, Levy believes, and this time of year it’s easy to get saddled with more debt. Credit cards, he admits, make purchasing easy.

Just after the start of the spending season, MasterCard Inc., headquartered in Purchase, announced big numbers tied to Black Friday deals. The company reported a 26.2 percent increase over last year in worldwide transactions processed over the MasterCard network. Although some shoppers use their debit cards with the MasterCard logo, the company promotes the perks of credit card use over the holiday spending season including price protection, purchase assurance in case an item is damaged or stolen, and zero liability if a card is lost or stolen amid the hustle of the holidays.

Despite MasterCard’s promotion of positive credit spending, some consumers simply can’t afford to be lured into the overspending net credit cards sometimes cast. Personal debt increased to $4,996 between July and September, according to TransUnion, a leading credit reporting agency. The agency also reported more cardholders had late payments heading into the holiday season.

It’s a sign of the times, said Howard Davidowitz, chairman of Davidowitz and Associates, a retail consulting and investment firm in New York City. He said today’s consumer is still much weaker than in the past. “You’ve got people in this country that have lost 40 percent of their net worth. That’s why retailers have spread the sale over a longer period of time. They have to, to make good.”

Shoppers are more inclined to spend what they have, in other words, to use debit cards or cash, he added. That notion falls in line with a poll done by Litle & Co, a Massachusetts-based payments processing company. The company determined that over 50 percent of shoppers were intent on using cash or debit cards to buy gifts. Only a third expected to use their credit cards for purchases. Davidowitz said that’s a nod to the fact that the economy “is going nowhere good.”

Levy believes the slight uptick in spending “makes for a good holiday season” but he’s unsure if that’s enough to keep a smile on the face of retailers. He contends that New Yorkers are more adverse to debt than in the past, and that makes the retail numbers something to watch over the rest of the holiday spending season.

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