Nov. 1 (Bloomberg) -- Home Depot Inc., Sears Holdings Corp. and other retailers may lose as much as 8 percent of their holiday sales this year because lenders and stores are clamping down on financing.

Almost a quarter of shoppers say banks cut the spending limits on their credit cards, according to a survey by America's Research Group, which also provided the sales-loss estimate. More people are being rejected for new cards, hurting sales for bigger purchases. Demand is being pinched just as retailers prepare to enter the holiday selling season, which accounts for as much as 35 percent of their annual revenue.

``Banks just don't have the money,'' said David Bassuk, a New York-based managing director at consulting firm AlixPartners LLP. The tightening credit is putting retailers ``at big risk to lose those sales or lose those customers,'' he said. ``There is a big concern there with the holiday spending.''

U.S. consumer spending, the biggest part of the economy, tumbled in September, and a purchasing managers' survey showed the biggest deterioration since 1968. That foreshadows a deeper slump for gross domestic product, which contracted at a 0.3 percent pace in the third quarter.

About two-thirds of holiday purchases are made using credit cards, estimates America's Research Group Chairman Britt Beemer. That excludes gift cards, three-quarters of which are also bought using credit cards, he said. His Charleston, South Carolina-based firm surveys 10,000 consumers a week.

First Decline

Beemer predicts holiday sales will decrease at least 4 percent, the first decline since he started forecasting in 1979, as consumers grapple with sinking home and stock values. His projections have been correct in 16 of the past 17 years.

Retailers that offer zero- or low-interest financing --which is often backed by banks -- may also rein in the credit they extend to shoppers to avoid being left with bad loans when customers can't pay them back.

If financing is ``offered, it's going to be to a much smaller segment of the population,'' said Red Gillen, a senior analyst at Boston consulting firm Celent LLC. ``It's great to attract customers with these financing deals, but you don't want to be holding delinquencies.''

A quarter of consumers polled in a Standard & Poor's survey released Oct. 15 said they're at or near the limits on their primary credit card, and 20 percent said they're approaching the limit on their secondary cards.

Lending Standards

Purchasing may shrink further as more lenders follow Citigroup Inc. and JPMorgan Chase & Co. and impose tougher lending standards to conserve capital.

Wal-Mart Stores Inc. executives told analysts at a meeting this week that customers have ``maxed out'' their credit cards.

Outstanding credit-card debt has risen 75 percent since 1999, while real wages have grown 4 percent in the same period, according to a report last month by Innovest Strategic Value Advisors, headquartered in New York.

Consumer credit outstanding fell in August for the first month since January 1998, the Federal Reserve said Oct. 7.

Best Buy Co. and other sellers of big-ticket items such as flat-screen televisions may be the hardest hit as in-store financing becomes less available and shoppers seek out cheaper items, said George Whalin, president of Retail Management Consultants in Carlsbad, California. Buying pricier products would push many to their credit limits, he said.

Zero-Interest Financing

Best Buy is offering at least 18 months of zero-interest credit for purchases exceeding $499. The chain's bank, HSBC Holdings Plc, hasn't tightened lending standards or started rejecting more applicants, said Ryan Robinson, chief financial officer of Best Buy's U.S. business.

Shoppers will probably spend less this Christmas than in previous years, said Chief Operating Officer Brian Dunn.

``I don't think we're going to fundamentally pull anyone off the sideline that can't play right now,'' Dunn said.

Target Corp., the second-biggest U.S. discount chain, is cutting credit lines and granting fewer increases to store-card holders to cope with the ``very difficult credit environment,'' said Chief Financial Officer Douglas Scovanner.

Credit ratings on new accounts have declined, particularly in areas like Florida and California that were hurt the most by the housing shakeout, Kohl's Corp. Chief Executive Officer Kevin Mansell said in an Oct. 29 interview. Kohl's has lowered approval rates in those regions, he said.

New Promotions

Sales haven't suffered because Kohl's customers have ``minimal'' store-card credit limits and don't usually reach them, Mansell said. Kohl's is adding promotions linked to its card this year.

Sears spokesman Chris Brathwaite and Home Depot spokeswoman Paula Drake declined to comment.

Banks are mailing fewer card applications to consumers, according to Synovate Mail Monitor, a division of New York research firm Synovate. In the three months through June, the most recent data available, the number of mailed credit-card offers dropped 17 percent, to 1.27 billion, from a year earlier, it said. That's the lowest since late 2003.

Lenders may be overcompensating for the more liberal approval rates of the past, said Ken Simon, a managing director at Loughlin Meghji & Co., a New York restructuring firm.

``Before they get back to where they should be, they're going to swing the other way,'' Simon said.

Fewer Applications

Synovate predicts a further decline in mailed applications this year ``as issuers continue to cut back due to economic uncertainty,'' Vice President Andrew Davidson said in an e-mail.

Citigroup said last month that it's reducing credit limits, tightening underwriting requirements and insisting on higher credit scores for cash advances.

Chase Card Services, a unit of JPMorgan, ``has lowered the credit limits of customers who have shown signs of increased risk,'' spokeswoman Tanya Madison said in an e-mail. It's still boosting them for its most credit-worthy customers.

Even so, holiday sales will be ``bleak'' as consumers become increasingly cautious about incurring more debt, S&P Chief Economist David Wyss said in an interview.

The less credit available to consumers, the more it ``impacts their confidence,'' National Retail Federation spokesman Scott Krugman said. Credit ``is their safety net.''

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net.

Last Updated: November 1, 2008 00:00 EDT