In an economy that is encouraging more thrifty behavior, consumers are turning to their debit cards instead of their credit cards at record levels.
According to an April 29 report from the credit card network, the total dollar volume of purchases made with Visa debit cards at the end of 2008 was larger than the amount spent on credit card purchases — the first time debit purchases surpassed credit. Visa’s 2008 fourth-quarter debit card transactions made up more than 50 percent of the company’s volume, compared to 40 percent during the same period in 2003.
“The reality is that the vast majority of consumers want to pay as they go,” said Stacey Pinkerd in a press release. Pinkerd oversees Visa’s debit-card business.
Visa’s growth in its debit card segment far exceeded analyst’s predictions. At U.S. Bancorp, debit card transactions in the first quarter rose more than 2 percent from the same period in 2008, while credit card purchases declined more than 4 percent.
MasterCard also witnessed a major shift toward debit cards, reporting its debit card transactions rose 13 percent last year while credit card purchases dropped more than 2 percent.
Payment cards have long been the preferred purchase method for American consumers, with credit and debit card purchases for retail goods and services outmatching cash and check payments since 2003. Debit cards have slowly approached the levels of credit card use in the 21st century, according to studies by the Federal Reserve.
The switch in payment cards is reflected in debt levels and types of accounts nationwide, with the U.S. government reporting in March that personal saving rates rose to 5 percent in January, the highest in 14 years. Meanwhile, revolving debt from credit cards plummeted more than 9 percent, said the Federal Reserve.