Retail sales up 4 percent in February

Last month, 59 percent of its sample of 150,000 consumers were paying off their monthly credit card bill in full, compared to 46 percrnt in February of 2009.

March 4, 2010 12:00:00 AM PST
Major retail chains say they saw sales rise 4 percent in February, despite blizzards in the East and Midwest. Instead of reaching for their credit cards, though, consumers have shifted to pay by cash or by debit cards. Experts say the recession has taught them to stop accumulating debt.

Consumers are getting comfortable with shopping again. Retail sales rose 4 percent nationally last month.

San Francisco-based The Gap beat projections with an increase of 3 percent, while its Old Navy stores saw a 6 percent jump.

Economics professor Mario Belotti at Santa Clara University says consumer spending could fluctuate in future months, but for now, one thing is clear.

"Consumers now are becoming more confident in the economy, more optimistic," he said.

It appears the recession, layoffs and concerns about job security have consumers avoiding credit cards.

Peter Pham is CEO of Billshrink.com, a Redwood City based website that helps consumers with saving money, finding the right credit card and reducing their bills.

"They're spending smarter. I think the spending is going to go up, but they're being a little bit smarter, not trying to go into debt. Federal Reserve numbers over the last 14 months, consumers have spent down $100 billion in debt, so they're paying off their debt right now," said.

Federal Reserve data indicates consumer debt was approaching $1 trillion at the end of March last year, but it fell throughout 2009, hitting $866 billion by the end of December.

That brought consumer debt down to 2006 levels and consumer behavior has changed.

"Not so much on credit cards, mainly cash. I try to keep it current," Paul Ferro said.

"We always use credit cards. It's just a way of managing kind of where we spend our money. We just pay it off every month," Stephanie Roodhouse said.

Others just steer away from credit cards altogether.

"I don't use credit cards. It's kind of not a good idea to shop," Hilda Couvidat said.

"The next test for consumers will come just in a few weeks. As income tax refunds trickle in, will consumers go shopping again, will they save it, or will they pay down their debt?


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