A new report from J.D. Power U.S. found debit cards are used by more consumers than any other form of payment at the point of sale, with 78% of consumers saying they use debit cards for the majority of their purchases.
However, the report found consumers on average tend to use at least four different methods of payment at varying times. The report found that 74% said they use cash, 66% use credit cards, 36% that use gift cards, and 28% said they use buy-now-pay-later.
Merchant apps and payment by check were cited by 20% of consumers with just 7% using digital payments like Zelle or PayPal, and only 3% saying they use cryptocurrency. The report found that 55% of consumers used non-traditional payment methods in the past 90 days, with the majority of those being digital payments and buy-now-pay-later options.
“Consumers now use multiple different payment options for dozens of different reasons, mostly correlated with specific needs but sometimes out of basic habit. By analyzing consumer behavior across the different POS payment types, scenarios and consumer personas, we’re able to provide critical insights on what’s driving utilization and what steps brands need to take to scale POS payment products,” said Miles Tullo, managing director, banking and payments at J.D. Power.
Consumer spending has remained resilient despite sustained inflation in many categories. Consumers are more discerning about their purchases with a bigger share of family budgets going to foods and consumables, fuel, entertainment and vacation, while they spend less on apparel, home decor or electronics, according to federal data.
The U.S. Census Bureau reported retail and restaurant sales for July were up 3.2% from the year-ago period.Sales were up 2.3% for the second quarter compared to the same period last year. Stripping out restaurant and gas station purchases, the National Retail Federation reported retail sales were up 3.8% in July over the same period last year. The trade group said retail sales were up 4% in the first seven months of the year. The Consumer Price Index reading in July was 3.2% higher than the same month in 2022, indicating much of the higher spending is from inflationary prices.
An August report from the Federal Reserve Bank of New York found credit card balances increased by $45 billion, from $986 billion in the first quarter of 2023 to a high of $1.03 trillion in the second quarter, marking a 4.6% quarterly increase. Consumers opened 5.48 million new credit card accounts in the quarter for a total of578.35 million credit lines by the end of July. Aggregate limits on credit card accounts increased by $9 billion and now stand at $4.6 trillion.
The New York Fed reported delinquency rates were roughly flat in the second quarter and remained low, after declining sharply since the beginning of the pandemic. However, the share of new credit card delinquencies increased 0.7%, in the quarter, more than any other credit type. Compared to other debt categories, credit card balances saw the most pronounced worsening in performance, following a period of extraordinarily low delinquency rates during the pandemic, the report stated.
“Credit card balances saw brisk growth in the second quarter,” said Joelle Scally, regional economic principal within the Household and Public Policy Research Division at the New York Fed. “And while delinquency rates have edged up, they appear to have normalized to pre-pandemic levels.”
FAQs
Report shows consumers prefer to use debit cards for most purchases. A new report from J.D. Power U.S. found debit cards are used by more consumers than any other form of payment at the point of sale, with 78% of consumers saying they use debit cards for the majority of their purchases.
Why do people prefer debit cards? ›
Frugal consumers may prefer to use debit cards because there are usually few or no associated fees unless users spend more than they have in their account and incur an overdraft fee. (The no-fee advantage does not hold for prepaid debit cards, which frequently charge activation and usage fees, among other costs.)
Why do many people prefer to use a debit card instead of a credit card? ›
For example, there's no chance of accruing interest or debt since there is no balance to carry from month to month. Since debit purchases are limited to the amount in your checking account, you're not borrowing money or accruing interest on a balance in the way you might with a credit card.
Why would financial institutions want consumers to use debit cards? ›
Which of the following is a reason that financial institutions want consumers to use debit cards? They reduce the number of teller transactions and check processing costs.
Do consumers pay more using debit cards than cash? ›
A number of studies have already demonstrated that people tend to spend more when they make cashless payments, such as paying by credit or debit card, rather than when paying with cash (Feinberg, 1986;Hirschman, 1979;Liu & Chou, 2020;Park, Lee, et al., 2021;Prelec & Simester, 2001;Raghubir & Srivastava, 2008; Runnemark ...
Why does Gen Z not use credit cards? ›
Among those who don't use credit cards, Gen Z is twice as likely as non-Gen Z respondents to cite a lack of understanding of credit card offerings as the reason. Heightened expectations around experience: Gen Z doesn't like to take any extra steps when paying.
Why is cash better than debit cards? ›
Using cash has the same financial implications as using a debit card, but with cash you may spend less than you would swiping a card because it's more tangible, and you can actually see the money go away.
Why should you never only use a debit card? ›
While both can be used to make purchases, only one will help you build credit. Furthermore, debit cards rarely offer the same perks as credit cards. They also offer significantly less consumer protection.
Why is it not good to use a debit card? ›
They have limited fraud protection.
Because debit cards typically have less fraud protection than credit cards, it's best not to use your debit card for online purchases.
Are credit cards more harmful than debit cards? ›
While debit cards and cash offer consumers limited benefits, using a credit card can help protect you against purchases that go awry. A credit card is guarded from fraudulent activity and some offer benefits like travel insurance and return protection.
Some ATMs will charge withdrawal fees, and if you use more than the agreed overdraft limit then the fees tend to be much greater than those incurred by credit card usage. Another disadvantage of debit cards is the fact that they have limited funds, which can slow down business.
What are the cons of accepting debit cards? ›
Fraud and Security
Finally, adding credit and debit card payment options increase the risk of fraud and other security issues. Credit cards are easily stolen and accepting them increases the chance of fraudulent card use. Card payment gateways facilitate the communication of sensitive personal and financial data.
Is it better to use credit or debit? ›
A credit card can protect your purchases from defects and failures, and handle disputes quickly without putting your money at risk, while a debit card can help you stick to your budget and keep you from increasing debt. Ultimately, it is up to you to decide which option is best for your financial situation.
Do people use cash anymore? ›
Today, roughly four-in-ten Americans (41%) say none of their purchases in a typical week are paid for using cash, up from 29% in 2018 and 24% in 2015, according to a new Pew Research Center survey.
Is it safer to pay with card or bank account? ›
By and large, credit cards are easily the most secure and safe payment method to use when you shop online. Credit cards use online security features like encryption and fraud monitoring to keep your accounts and personal information safe.
Do businesses get charged when customers use debit cards? ›
Most debit cards have a fixed transaction fee of around $0.07 that is charged to merchants. Most credit cards have a percentage fee of 2.3% plus a $0.10 transaction fee. If you're looking to save money, try to accept as many payments as possible through debit cards.
Why do many people prefer to use a debit card instead of a credit card Quizlet? ›
They require the number to be used along with a debit card or ATM card to help protect the person from theft. Why do many people prefer to use a debit card instead of a credit card? They can purchase items and have the money withdrawn directly from their account without having to pay interest on a credit card balance.
Are debit cards more popular than credit cards? ›
More people have debit cards -- but it's close
A staggering 242.7 million U.S. adults had debit cards in 2021, according to credit and debit card statistics collected by The Motley Fool Ascent. That's 93% of U.S. adults. Credit cards are also common, as 214 million U.S. adults (82%) had one or more in 2022.
Why do people run their debit card as credit? ›
If you run your debit card as 'credit' you can minimize your liability and recover your money quicker in some cases of unauthorized transactions and disputes. Reminder: Remember, running your debit card as 'credit' does not provide credit to cover the purchase.
