Consumers Exchanging Credit Cards For Debit Cards

Even as the credit crisis continues, the American consumer’s infatuation for plastic payments continue unabated. Consumers have, however smartened up about the risks of being too complacent on credit card spending. A lot are changing their credit card spending habits, even more are deciding to abandon credit cards altogether and move to debit cards instead.

Debit cards are nothing new. Essentially, debit cards are cards that you use to pay for your purchases just like credit cards. However, there is a very large difference between the two. While credit cards pay for your purchases through what is essentially a loan, debit cards are linked to your bank account and withdraws money from that account whenever you make a purchase. By making a purchase against your existing bank account balance, you are sure that the purchases is completely paid for. You won’t have to pay any extra fees, expect a bill at the end of the month or worry about getting hit with interest rate increases when you can’t make your monthly payments.

According to experts, debit card usage has been steadily on the rise in the past few years. The economic decline and the resulting credit card crisis has made debit usage rise very fast, however. Consumers are beginning to see credit cards as very risky modes of payment. Basically, card holders are moving away from credit cards because it makes it very easy for them to overspend and make purchases that they cannot pay off without incurring interest fees. The current situation of the credit card industry, dominated by high interest rates, high fees and lowering credit, hasn’t helped either.

According to a recent study, debit cards now make up 50.4% of the card based transactions in the U.S. They also make up the majority of card based spending in terms of total dollar amount. However, debit cards have a lower single transaction dollar spent average than credit cards. Consumers are still leaning on their credit cards for big ticket item purchases. Debit cards are seeing a lot of use mainly for small purchases such as convenience store shopping or coffee shop expenses.

Credit card companies are also beginning to warm up to debit cards. Notably, more and more debit cards are coming out carrying MasterCard and Visa logos. Credit companies are also looking into debit cards and changing the agreements to offer more debit card services and freebies for their customers and remain competitive in the credit industry. Security protections and freebie offers seen only in credit cards in the past are now making their way to debit cards.