Debit activity increases during the holiday season at Natick-based Middlesex Savings Bank and other local financial institutions.
Fewer people are heading to their local bank branch to withdraw cash for their holiday shopping, according to local bank and credit union executives. With electronic forms of banking becoming more common, shoppers are using plastic instead of cash.
At Natick-based Middlesex Savings Bank, debit activity increases during this time of year. Brian Lanigan, executive vice president, said that in the last three years there have been less face-to-face transactions at the bank because more consumers are using their debit cards.
Check-clearing activity tends to jump about 14 percent beginning the Monday after Thanksgiving at Middlesex Savings, Lanigan added.
Gerard R. Lavoie, executive vice president of Dedham Institution for Savings, said holiday spending methods have changed over time.
“In the old days, people used to cash out their Christmas clubs,” he said. “[Now] a lot of people have found payment methods other than cash. It’s convenient and people have gotten used to it.”
A recent survey conducted by the Federal Reserve confirms that electronic payment transactions are increasing in popularity. The “2004 Federal Reserve Payments Study” found that electronic payment transactions in the United States have exceeded check payments for the first time. The number of electronic payment transactions totaled 44.5 billion in 2003, while the number of checks paid totaled 36.7 billion, according to recent surveys of U.S. depository financial institutions and electronic payment organizations.
The study estimated the number and value of payments by check, automated clearinghouse, credit card, debit card and electronic benefits transfer.
Lavoie said one reason more people are using their credit cards is because of the rewards, like airline miles, they receive from the card company.
‘The Best of Intentions’
Mel Stiller, chief executive officer of Boston-based Consumer Credit Counseling Services of Southern New England, said he advises people to draft a budget that is affordable so when credit card bills come in, consumers don’t rack up interest for months or even years.
“Our busiest time of year historically is January through March,” said Stiller.
That window of time is generally when holiday bills come in and the home heating season peaks, Stiller said, and many people become overwhelmed.
For the holiday shopping season, Stiller’s organization supports debit cards vs. credit cards as payment methods.
“We always recommend debit or cash,” Stiller said.
The Massachusetts Bankers Association also supports that approach. In a recent financial management release, the MBA suggested using debit cards for holiday shopping.
“The obvious benefit of using your debit card at a retail shopping location is that it is not a credit card,” the statement reads. “You can only use it if you have money in your account, or [have] limited overdraft protection, and thus you will not suffer from the post-holiday-debt blues.”
If consumers do use credit cards, the MBA offers tips on knowing how much to put on those cards. Bruce Spitzer, director of communications for the MBA, said consumers shouldn’t spend more than what they can pay off in three months.
“[The credit card bill] eventually has to be repaid,” Spitzer said.
The MBA also suggests avoiding the temptation to sign up for too many chain-store credit cards, which can happen if consumers are lured in by the initial discount on their first purchase made with such a card.
Frederick Healey, president and chief executive officer of Workers’ Credit Union in Fitchburg, said January is also a busy month in terms of electronic transactions.
“All lines of credit bulk up at the end of the year and in January,” said Healey. “[Overdraft, home equity lines and credit cards] were accessed over the holiday season.”
The credit union handles approximately $1 million in member transactions each month; Healey said 58 percent of those are electronic.
Healey said despite the increase in electronic transactions, the credit union has handled the volume.
Consumers flocked more to their computers than to the malls on the Friday after Thanksgiving, according to statistics compiled by the Associated Press. Consumers, overall, intend to spend more during the holiday season than they did a year ago, according to a study from the Credit Union National Association and the Consumer Federation of America. But, as always, while retailers are pinning their hopes on high sales, economists and others have concerns about consumers getting into too much debt.
The season presents challenges to consumers and banks alike. For consumers, sticking to a budget during the November and December gift-buying rush can be difficult.
“Over the five years we’ve now been doing these surveys, our results reveal that holiday spending is an area where consumers start out with the best of intentions but end up exceeding their budgets,” said Credit Union National Association Chief Economist Bill Hampel. “Consumers on balance have told us they intend to reduce spending compared to the previous year, but actual holiday spending subsequently rose. This year consumers are feeling a big less restrained than last year, so spending should rise modestly.”
Consumers who contributed to the Credit Union National Association’s survey said they have fewer concerns this year about paying off debt and are more optimistic about their economic prospects. Nearly half of the 1,000 respondents said their economic situation has improved or they feel more confident about future economic prospects. About one in three said they have more people to buy for, so many are also compiling longer gift lists, according to the survey.
Despite the increase in online and other electronic transactions, local institutions say bank branches still see activity.
“The day after Thanksgiving, people come see us to get tooled up to go shopping,” Healey said.
Workers’ Credit Union staffs branches with extra employees during predictably busy hours, he added.
Middlesex Savings also adds staff between Thanksgiving and Christmas, usually employing college students, according to Lanigan, who said the bank experiences an increase in business banking because local merchant activity rises during the holiday season.
