Cash not yet king again, but coup may be coming

Sun Nov 23, 2008 2:11 PM EST

business, economy, glance, cash, wal-mart-stores

This holiday season, cash is in vogue again as consumers — maxed out on credit cards or trying to stick to a budget — are buying what they can actually pay for. Stores like J.C. Penney Co., Wal-Mart Stores Inc. and Target Corp. are noting a decline in credit card use as an overall form of payment, in favor of cash or debit cards.

The details:

CREDIT CLAMPDOWN: Since the financial meltdown accelerated in September, credit card issuers are further tightening their standards. A survey by the Federal Reserve released Nov.3, found that a sizable percentages of banks had "continued to tighten their lending standards and terms on all major loan categories over the previous three months." Nearly 60 percent of banks responding to the survey said they had tightened lending standards on credit card debt.

IMPACT ON RETAILERS: The trend is worrisome to retailers since paying in cash limits spending. Many stores are coming out with generous interest-free financing offers to make it easier for shoppers to splurge. Meanwhile, some upstarts are seeing new opportunities. Marwan Forzely, president and CEO of ebillme.com, an online option that doesn't require a credit card and allows Web shoppers to pay for purchases through their online bank accounts — says he expects to quadruple sales volume and the number of retailers he signs up as partners this year.

IMPLICATIONS FOR SPENDING: Buying what you can afford could be a new way of life for shoppers, who account for more than two-thirds of economic activity. Experts say the changes in consumer behavior may last long after this downturn and Americans are likely to stick with the more prudent ways of their parents or grandparents.