More and More Americans Are Turning to Debit Cards

As an alternative to paying cash or writing checks debit cards have seen exponential growth over the past few years. That growth trend is now being accelerated due to the recession. For the first time ever, according to 4th quarter figures for 2008, spending using debit cards has exceeded spending using credit cards.

That is a pretty amazing statistic. Prior to the recession there is no way I ever would’ve believed that would happen and I’ll  bet anyone that is honest about it would admit the same thing. And it wasn’t a one time deal for that quarter alone either.

The first quarter of 2009 saw $202 billion worth of goods and services purchased using debit cards as opposed to $176 billion using credit cards. There are several reasons behind this trend and it may not actually be a trend at all but rather a new way of buying things for consumers.

First and foremost the economic meltdown that we’ve experienced over the past two years has forced people to manage their money with more discipline. And that means managing money that they do not have. I’m talking about credit cards specifically here.

Many consumers either had their credit cards taken from them by the issuers, or have decided to leave them in their pocket and only spend what they could afford to pay for immediately. In other words, they are not using credit even if it is available to them.

Most experts agree that even as the economy recovers the use of debit cards will continue to grow because of their sheer convenience if for no other reason. Many banks are also making it more attractive to use them by offering rewards.

As a matter of fact, there will be more and more banks and credit card companies offering rewards for debit card use because they make a lot of money on fees charged to merchants every time a card is used. The merchants have to pay upwards of 2.1% of the total amount purchased every time a transaction is processed.

Don’t look for debit cards to completely replace credit cards anytime soon however. The cards also have their drawbacks including expensive overdraft fees. And of course, they do not offer cardholders an opportunity to tap into a line of credit. They are limited to using only the funds they have available in their bank account.

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