NEW YORK - Shoppers are doing all they can to keep their credit cards in their wallets this holiday season.

They're paying with cash and direct debits from bank accounts, taking advantage of free financing, and even cashing in frequent-flier miles.

A desire to stick to a budget and avoid interest rates that have risen sharply have aided a marked shift from credit cards. Banks have also reduced the amount of credit they are making available, even to low-risk clients.

Often, the switch to cash or debit cards means lower costs for stores, though merchants miss out on data on customer shopping habits from credit-card transactions.

Layaway and other payment methods increase costs, but they can be offset by new opportunities to grab sales from customers who would otherwise not able to buy.

Bill Hampel, chief economist at the Credit Union National Association, describes the consumer switch as "seminal."

Among the "new" payment methods:

Cash and its cousins: Credit cards accounted for 60 percent of transactions at malls operated by Taubman Centers so far this holiday season, down from 70 percent last year, according to an internal survey.

Earlier this year, U.S. debit-payment volume exceeded that of credit for the first time, Visa Inc. reported.

PayPal, an online payment service that lets shoppers pay directly from their bank accounts in addition to traditional credit, saw its active accounts surge 20 percent in its latest quarter compared with a year ago.

Alternative payments: Stores have responded by promoting alternate ways to pay and offers that defer payment for several months.

Sears and Kmart are now offering store-card customers who spend just $99 or more a chance to borrow at no cost for six months. A year ago, shoppers had to spend at least $199.

Others are touting Bill Me Later, which offers free financing, usually for 90 days. Gourmet food purveyor Harry & David put the Bill Me Later logo on the front of its holiday catalog. If the purchase is not paid off on time, customers get charged 19.99 percent interest that accrues over that time.

Layaway also has made a comeback.

Getting creative: Loretta Prencipe, an Alexandria, Va., freelance marketing professional, this year used cash for most purchases, while trading in 13,000 frequent-flyer miles from United Airlines to buy a $100 gift card from a restaurant.