Plastic money in Utah: credit trend good for merchants.

• Author: Mortensen, Curtis
• Position: Utah merchants rely on credit card purchases for approximately one third of retail sales

Despite the recent controversy over interest rates, the credit card trend is on the rise.

Using convenient credit has taken much of the sting out of consumer buying, in effect bailing consumers out of urgent bills when cash flow is a concern. Merchants, too, rely on credit cards. A consumer armed with a line of credit tends to spend more. Despite recent controversy over pending congressional legislation to limit interest rates, America's - and Utah's - dependence on plastic money has become a virtual stranglehold.

Credit card purchases now total about $500 billion nationally. As new technology makes card processing more efficient and more industries incorporate card usage, this figure seems destined to rise.

Jeff K. Thredgold has watched the latest interest-rate controversy with interest, Thredgold is a senior vice president and chief economist for KeyCorp, the parent company of Key Bank of Utah. "What many consumers don't realize is that the 18 to 19 percent interest rates in question come mostly from national bankcard institutions and their aggressive marketing strategies. The typical consumer will have been solicited several times by mail or phone with preapproved credit offers leading to marginal borrowers and increased losses. They use higher rates to balance it out. Local banks, especially in the Utah market, tend to have lower rates."

Plastic to the Rescue

But many consumers appear content with their present plastic relationship. With total retail sales in Utah now near $10 billion, credit cards command an economic impact of some $3 billion annually.

Merchants in Utah rely on credit cards for an average of one-third of their retail sales. During peak sales periods, such as Christmas, plastic money amounts to 40 percent of Utah's total sales, according to banking sources.

Mohsen Panah, an owner/partner of five businesses in Utah and California, says his livelihood depends on plastic. "Depending on what type of business you have, if you don't take credit cards, you are going to be much less competitive or not competitive at all. You have to be flexible, give your customers as many options as possible if you want their loyalty."

Lower Costs for Merchants

Technology is also a factor in increasing card usage. Electronically transferring data from merchant location to bank or processor has led to lower processing costs for merchants. Utah merchants can now choose from a plethora of computer gadgetry and communications systems including...