Debit Cards Up, Credit Cards Flat or Down?

In the current economic climate, it’s not surprising that credit card purchases might be growing more slowly or declining. What’s interesting is that debit card transactions apparently continue to grow, and now outstrip credit card purchases for Visa Inc.

On Thursday, April 30, The Wall Street Journal reported the following that should be noted by small business owners:

• “On Wednesday, Visa Inc. reported that the total dollar volume of purchases made using its branded debit cards surpassed credit-card purchases for the first time during the last three months of 2008. The $206 billion in U.S. debit-card transactions processed by Visa were 50.4% of the San Francisco company's total transaction volume in the period, up from about 40% in 2003.”

• “The surging popularity of debit cards largely reflects the growing use of plastic by American consumers. Credit- and debit-card purchases of retail goods and services vaulted past cash and checks in 2003.”

• “Unlike credit cards, which have balances that can be carried month-to-month, debit cards immediately deduct funds directly from a checking account. Debit cards are especially popular with younger consumers.”

• “To be sure, growth rates of debit-card transactions have slowed as Americans rein in their spending. Volume is widely expected to climb by a single-digit percentage this year, compared with more than 10% annually during the past few years. But credit-card usage is expected to keep declining.”

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council