Black Friday Should Be Called "Red Friday"
11/27/2004 23:20 Filed in: Culture Watch
Stop the bleeding already...
First the good news: businesses across America saw a combined $8 billion dollar day on the Friday after Thanksgiving. Spending was up 15% over last year. This will be good for the economy in the short term.
Now the bad news. Americans spent a WHOLE lot of money they didn't have which may lead to economic disaster in the long term.
The numbers are still coming in, but it's very interesting what is being said and not being said. Of the $8 billion spent yesterday, Visa is claiming that $4.1 Billion (that's slightly more than half for the mathematically challenged) was processed through its credit cards. Now in all the reports, the folks at Visa are quick to point out that 44% of all transactions were made with Visa debit cards meaning this portion of spending was made with readily available cash from checking accounts.
While that is commendable, what was said nowhere in the reports is that if 44% was spent with Visa debit services, 56% was spent with Visa credit! Let's do the math on that. If Visa is claiming $4.1 billion in transactions and 56% was in credit purchases, that means Americans spent $2.3 billion that they didn't have.
And that's just Visa. Of the remaining $3.9 billion spent on Friday, there's no telling how many folks used their Mastercards, Discover, and American Express cards to buy things they don't have the money for. And this is not good for the economy in the long run because in many cases it will overextend the financial health of American families, and in some scenarios, eventually lead to bankruptcy.
One report that I heard said that the average purchase made on Friday was $64, but the average credit purchase was $85. When you use credit cards--even if you pay them off at the end of the month--studies have shown that you spend more. When you spend cash, you are more aware of the outflow of your resources than when you use credit.
Maybe the day after Thanksgiving is "Black Friday" to the retailers, but it's "Red Friday" to the average consumer who is charging for Christmas gifts that he or she can't afford.
It's been a little more than one year since I said "No more" to living on credit (read my blog, "Searching for Financial Peace" to know more). Take it from an ex-credit addict, just say no this Christmas to spending what you don't have. When you're still paying for Christmas--plus interest, finance charges and late fees--in June, all the people you bought gifts for won't even remember what you got them.
Here's an idea. Why don't you simplify instead? Make your Christmas cards (I received a homemade birthday card today, and it was just fine). Instead of big expensive gifts, give coupons for gifts of time, afternoons or evenings to spend together at the receiver's choosing. Make your husband a scarf and your neighbor a homemade cake. Most of us will feel a need to purchase some gifts, but make a small, yet reasonable limit to how much you're willing to spend and stick to it.
And then tell your family that the greatest gift you are giving them this Christmas is the gift of financial security by not charging things for which you can't pay cash...
Now the bad news. Americans spent a WHOLE lot of money they didn't have which may lead to economic disaster in the long term.
The numbers are still coming in, but it's very interesting what is being said and not being said. Of the $8 billion spent yesterday, Visa is claiming that $4.1 Billion (that's slightly more than half for the mathematically challenged) was processed through its credit cards. Now in all the reports, the folks at Visa are quick to point out that 44% of all transactions were made with Visa debit cards meaning this portion of spending was made with readily available cash from checking accounts.
While that is commendable, what was said nowhere in the reports is that if 44% was spent with Visa debit services, 56% was spent with Visa credit! Let's do the math on that. If Visa is claiming $4.1 billion in transactions and 56% was in credit purchases, that means Americans spent $2.3 billion that they didn't have.
And that's just Visa. Of the remaining $3.9 billion spent on Friday, there's no telling how many folks used their Mastercards, Discover, and American Express cards to buy things they don't have the money for. And this is not good for the economy in the long run because in many cases it will overextend the financial health of American families, and in some scenarios, eventually lead to bankruptcy.
One report that I heard said that the average purchase made on Friday was $64, but the average credit purchase was $85. When you use credit cards--even if you pay them off at the end of the month--studies have shown that you spend more. When you spend cash, you are more aware of the outflow of your resources than when you use credit.
Maybe the day after Thanksgiving is "Black Friday" to the retailers, but it's "Red Friday" to the average consumer who is charging for Christmas gifts that he or she can't afford.
It's been a little more than one year since I said "No more" to living on credit (read my blog, "Searching for Financial Peace" to know more). Take it from an ex-credit addict, just say no this Christmas to spending what you don't have. When you're still paying for Christmas--plus interest, finance charges and late fees--in June, all the people you bought gifts for won't even remember what you got them.
Here's an idea. Why don't you simplify instead? Make your Christmas cards (I received a homemade birthday card today, and it was just fine). Instead of big expensive gifts, give coupons for gifts of time, afternoons or evenings to spend together at the receiver's choosing. Make your husband a scarf and your neighbor a homemade cake. Most of us will feel a need to purchase some gifts, but make a small, yet reasonable limit to how much you're willing to spend and stick to it.
And then tell your family that the greatest gift you are giving them this Christmas is the gift of financial security by not charging things for which you can't pay cash...