Debit remains a popular way to pay – in many cases, more popular than credit. Here’s how Americans use debit today
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As the economy recovered, it was unclear if the expanded use of debit cards would become permanent, or if our payment habits would revert to what they had been before the recession.
Here’s how Americans use debit cards in 2017:
The big picture of debit card usage
The Federal Reserve Payment Study for 2016 shows significant growth in debit card payments between 2012 and 2015.
During this period, the value of payments using both prepaid and non-prepaid debit cards grew from $2.1 trillion to $2.56 trillion. The number of debit payments increased from 56.5 billion in 2012 to 69.5 billion in 2015, the largest increase in the number of payments among the payment types considered during this period.1
Looking at it on a year-over-year basis, the volume of debit card transactions grew at an annual rate of 7.1 percent, while their value grew by 6.8 percent each year from 2012 to 2015. Furthermore, most of the growth came from non-prepaid debit card transactions.1
Number and value of debit transactions 2007-2017
|2016||$2.56 trillion||69.5 billion|
|2013||$1.82 trillion||47 billion|
|2010||$1.4 trillion||37.9 billion|
|2007||$0.97 trillion||25 billion|
A closer look at the trends
Whether you measure debit card usage by the number transactions or by their value, it’s clear that debit has become a more popular form of payment in the last five years. Yet, when examining the most recent data, it appears that the growth in debit card usage is starting to level off.
For example, Visa’s operational performance data show less substantial debit card growth for 2016 compared to 2015 in both value and transaction volume.
Visa debit transactions Q4 2015-Q4 2016
|Q4 2015||$470 billion||9.59 million|
|Q1 2016||$474 billion||9.55 million|
|Q2 2016||$493 billion||10.1 million|
|Q3 2016||$478 billion||9.79 million|
|Q4 2016||$493 billion||9.96 million|
A similar trend is seen when looking at Mastercard’s debit purchase transactions, which fell by 0.8 percent between the fourth quarter of 2016 and the first quarter of 2017.3
Mastercard debit transactions Q4 2015-Q1 2017
|Q4 2015||$197 billion||3.90 million|
|Q1 2016||$203 billion||3.93 million|
|Q2 2016||$207 billion||4.16 million|
|Q3 2016||$201 billion||4.04 million|
|Q4 2016||$199 billion||3.94 million|
|Q1 2017||$201 billion||3.89 million|
Finally, TSYS’s 2016 U.S. Consumer Payment Study found that credit cards replaced debit cards as the “most preferred payment form” for the first time since it began conducting the surveys. When asked which payment form they prefer, 40 percent of respondents chose credit, while 35 percent selected debit and 11 percent mentioned cash. 4
How we use debit cards
When you look at the distribution of non-cash payments in the United States, another fascinating fact about debit cards is revealed.
For the year 2015, debit card usage accounted for 69.5 billion in payments, dwarfing all other forms of non-cash payments including credit cards (33.8 billion) and checks (17.3 billion).1
But when non-cash payments from 2015 are viewed by dollar value, the opposite picture emerges. Although the $2.56 trillion in annual value of debit cards transactions sounds like a large number, credit cards represented $3.16 trillion and checks were $26.83 trillion.1
ACH debit transfers by dollar value totaled $54.76 trillion, while ACH credit transfers accounted for a stunning $90.54 trillion. The conclusion is that Americans prefer debit cards for a high volume of smaller transactions, while larger non-cash purchases tend to be made with other forms of payment.1
The habit of using debit cards for smaller transactions is obvious when looking at the types of retailers where consumers prefer to use debit cards.
Respondents to the 2016 TSYS payments survey indicated that 46 percent of Americans were likely to use their debit cards at the supermarket, far more than cash or credit cards. Another 39 percent reported preferring debit cards at gas stations, 34 percent at discount stores, and 31 percent at department stores.4
Another indication that Americans use their debit cards for numerous, small transactions is the sheer number of uses per month.
Debit card issuer Pulse noted that the number of debit transactions per active consumer card reached a record high of 23.6 transactions per month in 2016.5
How many debit cards do Americans have?
When TSYS asked credit and debit card users how many cards they had, the overwhelming majority (71 percent) responded that they had one debit card. Sixteen percent had two debit cards, but only 6 percent had three, and only 4 percent said they had four debit cards. In contrast, 39 percent reported having only a single credit card, 26 percent said that they had two credit cards, 17 percent had three credit cards, and 14 percent had four. 4
Debit card fraud
In the last few years, payment fraud (including debit card fraud) has become a frequent topic of headlines and concern.
In March of 2017, FICO reported that the number of debit cards that were compromised at ATMs and merchant card readers rose by 70 percent in 2016 compared to 2015.6
It also reported that most of the compromises took place at non-bank ATMs, such as the ones you’d find at gas stations and in convenience stores. 6
Then, in August of 2017, FICO reported a 39 percent rise in debit cards compromised at ATMs and merchants in the first half of the year, compared to the same period in 2016.7
Yet this dramatic rise in debit card fraud is poised to collide with the trend toward more fraud resistant payment cards that include EMV smart chips.
According to Pulse, there was a dramatic rise in the issuance of chip-enabled debit cards in 2016.
An estimated 80 percent of U.S. debit cards had been converted to chip cards in 2016, which has resulted in a 28 percent decline in fraud loss rates in 2016 compared to 2015.5
Chip card transactions involving debit cards grew by 650 percent from 2015 to 2016, and accounted for 30 percent of debit card transactions in January 2017. Yet even with those declines, U.S. financial institutions still lost an estimated $900 million to debit card fraud in 2016.5
- The Federal Reserve Payments Study 2016
- VISA Operational Performance Data Q4 2016
- Mastercard Supplemental Operational Performance Data Q1 2017
- 2016 TSYS U.S. Consumer Payment Study
- Pulse Study: Debit Fraud Loss Rates Decline… 2017
- PR Newswire “FICO Reports a 70 Percent Rise In Debit Cards Compromised at U.S. ATMs and Merchants in 2016”
- FICO report August 2017