By Erika D. Smith, The Indianapolis Star

Nov. 1--One kid wants an iPod Touch. Another wants video games. Still another wants a Nintendo Wii.

For any family that's feeling the weight of the recession, the holidays are an expensive proposition. And that's why some families are getting creative.

Instead of spending money, some consumers plan to redeem points racked up on their credit and debit cards to get gifts for their loved ones.

Rewards programs from companies such as JPMorgan Chase and American Express offer a catalog of items ranging from electronics to gift cards.

Consumers who have spent years accumulating points by using their cards to buy everything from groceries to clothes can pick the items they want.

"Why pour out the cash when I can redeem points?" said Jennifer Morris, Indianapolis.

The mother of three said she and her husband plan to buy an iPod Touch and accessories for the family's Nintendo Wii gaming console with points earned on their American Express card.

Last year, a rough year for the family, was the first time it occurred to Morris to tap into the points that have been accruing without much use for a decade.

"I was perusing the catalog, and I thought, 'Oh, my God. That's the same Wii console that I was going to buy.' "

Mark Sackett, who started collecting points on his First Merchants Bank debit card last year, also plans to redeem his points for a Wii.

"As I see it, as a consumer, it's a way for me to stretch my dollars even more," the Brownsburg resident said. "I accumulate these points throughout the year. It's added value for those everyday purchases."

The idea of getting something for nothing -- or what seems like nothing -- is bound to appeal to holiday shoppers this year.

The National Retail Federation predicts that retail sales will decline 1 percent in the last two months of this year, to $437.6 billion. That's not as bad as last year, but it's still well below the 10-year norm of 3.4 percent growth.

Shoppers, the trade group says, will stick to a budget as they have for much of this year.

"I definitely think people are more budget-conscious this year and are trying to make their budget stretch," said Stacy General, senior manager for e-commerce service PayPal. "And if they have that (rewards program) option, they may exercise it."

For that reason, debit cards will continue to be more popular than credit cards for outright spending, said Brian Riley, research director at TowerGroup, an advisory services firm for the financial services industry.

Debit cards are issued by banks and are tied to consumers' checking accounts. Unlike credit cards, they force people to stick to a budget and spend only the money they have.

Banks, for their part, have been pushing consumers to use debit cards in recent years. And this year, the use of those cards finally surpassed credit cards in terms of the number and amount of transactions, according to TowerGroup.

First Merchants Bank, for example, introduced its MasterCard-branded debit card in September 2008, and the number of customers who use it has been growing steadily, said Sackett, who is deposit product manager for the Muncie-based bank.

For consumers, the only problem is that, in general, the rewards programs for debit cards aren't as good as those for credit cards. Consumers earn about half as many points as they do on credit cards. The reason is card issuers make less money from debit cards than they do from credit cards.

But as the popularity of debit cards has grown, so has the robustness of their rewards programs. That will continue to improve, Riley said.

It's a perfect storm of sorts, where consumers are using debit cards more than ever, racking up more rewards points than ever, and because of the recession, have more reasons to redeem them than ever.

Pearl Regenstrief, Zionsville, plans to take advantage of it.

She and her husband are cashing in the points on their Chase debit card to buy gift cards for their seven grandchildren for Hanukkah.

"I haven't researched it thoroughly yet, but I am planning on doing it," she said in an e-mail. "I am going to look to see what is available and order them soon."

Call Star reporter Erika D. Smith at (317) 444-6424.

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