Cash is king for U.S. holiday shoppers: survey

CHICAGO (Reuters) - Cash is king this holiday season as consumers try to limit their credit card purchases or have maxed out on credit altogether, according to a survey conducted for Reuters.

A total of 88.6 percent of those surveyed said they would use more cash for buying holiday gifts this year, while 59.7 percent said they will use credit cards less, according to the survey by America's Research Group. Only 1.1 percent said they will use credit cards more.

These stark differences could be partly due to consumers feeling more credit pressures as the economy weakens and banks become less willing to extend credit, said Britt Beemer, chairman of consumer tracking firm America's Research Group.

But another, even larger reason could be that many consumers -- 43.2 percent -- will give gift cards less often this year because they are worried that those cards would be worthless if a retailer files for bankruptcy.

Consumers who shy away from gift cards may just give cash instead, he said.

"If the only store I know of (that) is going to be around for sure is Wal-Mart, and I don't want to give a girlfriend a Wal-Mart gift card, cash is a lot more sexy," Beemer said.

The 2008 holiday season is shaping up to be challenging, at the very least, for retailers. The National Retail Federation has forecast the lowest increase in spending by consumers in at least six years.

Adding to the pressure for traditional retailers is the fact that bankrupt retailers like Circuit City are liquidating inventory at stores they are closing.

One-third of survey respondents said they will go to liquidation sales in place of their normal retailers this Christmas.

Consumers are also trying to spread the pain across several paychecks, with 65 percent saying they plan to buy a few gifts each week and 31 percent saying they started shopping early so they would not have a big bill in one month.

One positive for retailers? The move to give cash instead of gift cards could lift sales during the holiday season, Beemer said.

"If somebody has cash, they spend it immediately," he said. "If somebody has a gift card, it rolls on to next Memorial Day or July 4 weekend."

Another positive factor could be lower gasoline prices, with 35.4 percent of respondents saying that lower gas prices will encourage them to spend more.

The survey consisted of 1,000 interviews conducted November 6-8 and has an error factor of plus or minus 3.8 percent.

(Editing by Matthew Lewis)