Debit cards have now overtaken credit cards as the method of choice for payments according to recent data. Retailers expect this trend to continue up to the holidays, with more people opting to curtail or limit their use of credit cards. People have been hit recently with rising interest rates and lower credit card limits, and are now seeing less incentive in swiping their credit cards. Another component to the changing consumption trend is that consumers are now paying more attention to their credit scores and are careful not to do things that would jeopardize their credit standings.
The weak business environment has forced a lot of banks to lately raise interest fees and lower credit limits. Critics, however, say that card issuers are just trying to take advantage of the time they have left before credit reform bills are enforced next year, which would effectively restrict their rate setting capabilities.
In general, more and more consumers are finding it more convenient to go plastic (credit card and debit card) and are finding less and less reasons to use cash or check books.
Salvation Army, a charitable group that solicits donations from people, has also taken notice of this growing trend and in response has started accepting credit card donations. Although most people would give coins, individuals who use their cards end up donating more, according to the charitable group. For added convenience, the group accepts both credit and debit card donations.
Industry analysts have long predicted that debit cards would eclipse credit cards in terms of frequency of use, but are surprised with the speed in which the transition is occurring.
According to research, people prefer to use credit cards for big-ticket items such as electronic appliances, furniture and jewelry. Debit cards, on the other hand, are used more for non-discretionary items and necessities. However, since the prevailing weak economic conditions force people to be more frugal, they cut back on big ticket item purchases.
This is another reason as to why debit card use is currently outpacing credit card transactions.
Experts, however, would advise consumers to use credit cards for certain purchases because of the benefits and advantages that they carry. For example, credit cards offer extended warranties for specific items such as electronic appliances and gadgets. Another added feature is better fraud protection.
With debit cards, money is taken immediately from a person's account so disputes are harder to resolve.
Card issuers like Visa and MasterCard are not worried about the trend though, since they make money in both debit and credit card transactions.