WHAT would you buy with a Wal-Mart gift card? I always go a bit mad when I’m in Wal-Mart. There is none in New York City and they are so cheap. Last time I was there I got PlayStation 3 games, an air pistol, pillows, pots and pans. I nearly got some jeans, too, but they were “relaxed through seat and thigh” and, thankfully, I am not. Yet. I also eyed some fighting fish in the pet department and a collapsible canoe that looked really cool.

What I wouldn’t buy with a Wal-Mart gift card is groceries. But that, says the retail giant, is what is being bought in recent months with the tokens.

“Gift card redemptions were below expectations and customers appear to be holding gift cards longer and using them more often for food and consumables rather than discretionary purchases,” said Wal-Mart on releasing its sales figures last week.

Consumers are taking what amounts to free money and rather than spend it on electronics or fighting fish, are buying bread and bin bags. It’s all very worrying.

America’s attitude to cards seems to be at a turning point. In the not-so-distant past, Americans used credit cards mainly for discretionary purchases, such as furniture, appliances and jewellery. More recently they have been slapping out the plastic to pay for necessities such as groceries and petrol.

Credit cards are so vital to American consumers that there have been reports of people paying credit card bills before their mortgages and even putting their home loan payments on the tick.

Now they seem to be pulling back. Last week, the Federal Reserve reported an abrupt slowdown in consumer credit-card borrowing. In December, Americans owed $944 billion (€650 billion) in revolving debt, most of it on credit cards, a seasonally adjusted annualised increase of 2.7%. This is sharply down on the figure for November, which grew at a seasonally adjusted rate of 13.7%.

The obvious culprit for the slowdown is the housing market. American consumers turned their homes into cash machines during the housing boom as rising home equity fuelled a spending spree of historic proportions.

Now the boom is over and not only is the use of plastic down, but people seem to be ignoring their cards’ debts altogether. Credit-card delinquencies – not making minimum monthly payments – are rising, albeit from a record low. In December, 7.6% of credit-card loans on average were either at least 60 days delinquent or were in default, up from 6.4% a year earlier, according to research firm Riskmetrics.

In the long run is this aversion to splashing out such a bad thing? Yes and no. In 1984, Americans saved more than one-10th of their income, according to the government. By 2005, the savings rate had gone negative for the first time since the Great Depression. Good times caused the reversal as cheap credit and the housing boom led Americans to spend more than they earned.

A return to positive savings wouldn’t be bad for most Americans. Consumer spending accounts for two-thirds of the economy, however, so it doesn’t pay for America to be too sensible with those gift cards.

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