As if anyone needed another sign of how badly things are looking for credit cards, it seems that debit card usage has finally overtaken credit card use among American consumers.
Research firm TowerGroup recently released data indicating that debit card use have overtaken credit card use both in terms of the number of transactions made and the total amount in dollars spent for. TowerGroup is a subsidiary of MasterCard worldwide.
According to the data gathered by TowerGroup, debit card transactions now make up for 50.9% of all plastic transactions among American consumers in terms of total dollars spent. However, debit card transactions have a lower average dollar amount per transaction compared to credit cards. The data shows that debit cards are a popular payment option for small purchases such as those made in coffee shops, gas stations and convenience stores.
Credit cards still dominate the transactions focused on big ticket items such as large-screen televisions. According to Brian Riley, the research director of TowerGroup who also co-authored the study, consumers are still turning to their credit cards for purchases of big ticket items.
According Riley, debit card use was already seeing an increase before the economic crisis. However, he said that when the crisis hit, it definitely accelerated the move of consumers to debit cards instead of credit cards. There are also some other factors at play.
One factor is that major card issuers MasterCard and Visa are making more and more cards linked to bank accounts readily available to consumers. Debit cards have become much more easier to get nowadays. Technology has also developed to the point that a larger number of merchants are able to accept debit cards for transactions.
Another factor in the rise of the popularity of credit cards is that many employers are now directly putting their employee's pay directly to their bank accounts. According to the figures, 72% of workers have their salaries put directly in their bank accounts. 92% of government workers also have the same convenience. Debit cards are also much easier and more convenient to use than ATM. Using a debit card also lets the card holder skip on expensive ATM withdrawal payments.
Lastly, people have begun to tighten up, something caused directly by the continuing economic crisis. As more and more people recognize the risk of using credit cards for purchases, debit cards are gain more and more popularity among American consumers. Credit has also become much more difficult to get as credit card companies tighten up. People wanting to have the convenience of paying with plastic are therefore turning to debit cards.