Sign of the times: Americans increasingly opt for debit cards
Filed under: Company News, Economy
"Consumers clearly prefer debit," says Christopher Brendler, an analyst with Stifel Nicholaus in Baltimore who follows both companies. And credit's comeback could be a long way off. "It's going to be a while, and who knows if ever comes back," Hendler adds.
For Visa, debit purchases accounted for more than half the U.S. volume on its network (PDF), the world's largest, during the first three months of this year. That's the second quarter in a row that most of Visa's purchase volume has come from debit card transactions.
At MasterCard, debit purchases accounted for 40.6 percent of U.S. transactions (PDF), compared with 35.8 percent a year ago and 32.7 percent in 2007.
Brendler says the trend toward debit cards is a product of the recession. Overextended and anxious about the economy, consumers are borrowing less and paying down debt. And banks say they'll cope with new consumer protections for cardholders by issuing fewer cards and extending less credit.
Surely, credit is already crimped for many consumers. Federal Reserve data, released earlier this month, shows that credit card balances shrank for four straight months through May. But with unemployment rising, some economists think joblessness may force some to turn to plastic to stay afloat.
That would be bad news for highly leveraged U.S. consumers. But it'd be a boon for Visa and MasterCard. Both posted quarterly results that beat analysts' estimates. (Visa reported Wednesday night and MasterCard Thursday morning.) But while the companies said they processed more transactions last quarter, the dollar value of those transactions fell in a sign that consumers are spending less.
Perhaps more worrying: Growth in U.S. debt purchases, which has long outpaced credit card growth, is slowing at both companies. The American consumer is hurting, and that's slowing down Visa and MasterCard's domestic businesses.
Reader Comments (Page 1 of 2)
7-30-2009 @ 6:56PM
teeball said...
Every Friday I take the cash I need for the week,,I stopped using all cards except for emergency's and they need to be important,banks can kiss my azz,
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7-31-2009 @ 10:12AM
RAD said...
Just paid my entire balance on BofA (10K).. Then, tore up the card... With the "rip off" rates, two things will happen.
1. People that can.. will pay off the balance (like me).
2. What will be left are those that are in situations that do not allow them to pay off their balances. Meaning.... BofA, sooner or later, will be the loser.. Note, those that could not pay their mortgage...... Ahem... walked away.................
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7-31-2009 @ 11:10AM
DoulosXp said...
Who among us would walk into a bank put $1.26 on the counter and receive $1.00 in return and be happy about it? That is what is happening when credit cards are used. (Whatever the interest rate is figure that in to the cost of the dollar you get) Cut the cards up, live within the income and buy some peace of mind.
I know its difficult to change habits but in this economy it sure is what is needed.
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7-31-2009 @ 11:41AM
Lucrezia said...
That should not be a surprise at all for major credit card companies. Credit Cards have been, partially, the ruin of our society with people signing by the dotted line and getting in debt each month that passes by to the point that they are unable to pay it off because of the high interest rates.
I have a business, or I might say I still have my doors open. I have always tried to get my customers to pay with a debit card or check simply because I did not want to pay the high rates for the transaction itself. When I started to charge my customers for the transactions they wanted to eat me alive. I realized that many of them didn't have a clue that I was paying a certain percentage so that they could get in debt. Crazy eh!
Everyone should cut up their credit cards , do without, and never get one ever again.
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7-31-2009 @ 12:11PM
joe said...
NOTE: EVERY TIME YOU USE A CREDIT CARD,CHECK OR DEBIT CARD TO PAY A BILL AND YOU CHECK OFF THE BOX THAT SAYS "I AGREE" YOU ARE ALLOWING THOOSE COMPANY'S TO ACCESS YOUR ACCUNT ANYTIME YOU OWE THEM MONIES WEITHER YOU WANT TO PAY THEM OR NOT AND YOUR BANK TELLS YOU BY GIVING THEM A PAYMENT WITH ANY INFORMATION TO YOUR ACCOUNT YOU ARE GIVING AUTHORIZATION TO TAKE MONIES AT ANYTIME THEY FEEL THEY CAN
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7-31-2009 @ 12:19PM
Donovan said...
Consumers are sick and tired of credit card issuers/banks financially extorting them with their excessively high unjustified interest rates. And its about time consumers fight back. Banks will lose BILLIONS of dollars in additional revenue. As more and more consumers STOP using credit cards, and pay off their balances.
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7-31-2009 @ 12:32PM
harley_D said...
I cut up my credit cards and I am paying off all of them. I have told my wife and kids if the cash will not pay for it then we do not need it. Cash is KING...i will not even use my debit card to purchase gas. The banks and the Government can kiss both sides of my ass.....
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7-31-2009 @ 3:23PM
Dianne said...
You are definitely on the right track with that comment buddy...I was never into credit cards anyway unless it was for business/emergency now the highest rate on my credit cards is 9.3 with the dreadful Chase which they closed. Good for them and better for me. Credit cards can kiss the right and left of my ass too, but they can also suck in the center of it:) Pieces of shit!
7-31-2009 @ 12:35PM
arentany said...
The use of debit cards shows the wisdom of the consumers. Credit is dead as an effective tool (especially on more costly purchases such as homes, cars, etc.). Cash, and holding only cash (vs. pension funds which will collapse, etc.), is the only safe way for some time to come. Debit cards are a great way to go.
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7-31-2009 @ 12:51PM
Alnusw said...
This is great news ! Now for the next step: stop using Debit Cards and go back to actual Cash. This will really "PO" the bankers who are pushing for a "cashless" society.
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7-31-2009 @ 6:05PM
KIWI said...
The problem with cash is that it can be stolen or lost and you are Out of luck-...A debit card can be quickly easily stopped and you don't lose....Gift cards are also easily stolen- NO Recourse- you are out that money also.....Debit cards ARE the way to go- for safety alone.
7-31-2009 @ 2:04PM
bob40wil said...
I only use cash or debit, the banks are doing legally what the underword gets put in prison for.
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7-31-2009 @ 2:05PM
mike young said...
Where is my $100,000 bonus?
Mike
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7-31-2009 @ 2:30PM
steve said...
AMERICANS ARE SO CLUELESS,,NEVER DEBIT IT COST YOU MONEY ON YOUR OWN ACCOUNT,,ON A BANK CARDS THATS YOUR WON,,ONLY DO A CREDIT IT'S FREE,,,,,,,,AMERICANS ARE SO EASY TO RIPE OFF,,,BILLIONS OF THEM DON'T THINK,,IT'S FUNNY THAT THEY GET PAST A DAY TO DAY WITHOUT FALLING ON THERE FACE,,EVEN IF THEY BEEN DAILY,,AS FOR REGULAR CREDIT CARDS STOP PAYING ON THEM,,IT'S NOT YOUR MONEY ANYWAY,,,
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7-31-2009 @ 2:46PM
Patty said...
What?
7-31-2009 @ 3:59PM
Kimberly2 said...
Doesn't cost me a dime to use my Debit Card, it's called a Credit Union!
7-31-2009 @ 6:26PM
Steve is part of the problem said...
Steve - Your complete lack of knowledge on the subject frightens me. Not to mention that you have no idea how to express a complete thought that makes sense. To think a bank would issue you a debit or credit card explains to the rest of us what is costing the banks so much in time & money. You are a drain on the system so it would be better if you stuck to cash & your simple money orders for everything.
7-31-2009 @ 2:40PM
STATEMAN26@AOL.COM said...
Most credit card companies that exist today will have defaulted before prosperity returns. However, the people never learn.
They stop using credit cards during recessions because they're scared. As soon as the financial media declare the depression over and prosperity has returned, the consumer starts returning to credit cards.
Just wait and see.
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7-31-2009 @ 2:53PM
timothy said...
Mike...Oammy used your bonus to buy the beers
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7-31-2009 @ 3:24PM
linn said...
I closed my credit cards and now only use cash or debit card. I buy only what I can pay for at the time. My spending is now down to only essentials. The credit card companies deserve this slowdown..which I pray will be forever...after they screwed america for so long...especially Household Bank...they charge 30% interest. Hopefully they will be gone..
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