NEW YORK – Debit card use was growing rapidly before the economy tanked, but the recession appears to have made them the preferred form of plastic.
Both in terms of the number of transactions and the total dollar amount spent, debit cards have overtaken credit cards for U.S. consumers.
In dollar terms, debit cards are now used for 50.4 percent of all noncash sales, though they have a lower average dollar amount per transaction, according to research from TowerGroup, a subsidiary of MasterCard Worldwide. Those smaller sales are key: Debit card sales dominate small purchases like those made in convenience stores, coffee shops and gas stations.
Big ticket items like wide-screen TVs are still more often paid for using credit cards, said Brian Riley, a TowerGroup research director and co-author of the study.
The trend toward debit was apparent prior to the recession, but its growth was accelerated by the downturn, Riley said. “It certainly happened faster,” he said. The study shows that in 1990, debit cards were used for just 1 percent of all noncash transactions.
Part of today’s increased usage comes because cards linked to bank accounts are easier than ever to get and to use. More banks offer cards with bank card logos like MasterCard and Visa than in the past. At the same time, the technology that merchants needed to accept debit purchases has spread dramatically.
Meanwhile, with direct deposit use spiking – the study says 72 percent of salaried workers now have their pay sent directly to their bank accounts, and 92 percent of government workers do so – debit cards make it easier for people to access their money without paying expensive ATM fees.
Those factors, combined with tightening credit and more attention to personal spending in the recession, put debit use over the hump.