Debit Cards Make Inroads in Credit Card Use

Nearly half of US households holding credit cards (48%) still use credit cards for the majority of their card-based purchases. These credit-card loyalists charge $1,000 or more each month, tend to be slightly older, and disproportionately reflect households at both the bottom and the top of the economic ladder.



However, a growing number of households do most of their shopping with debit cards rather than credit cards. These consumers now total about one-third of all households and are heavy spenders. On average, using all possible payment methods, they spend $1,000 more than the credit card loyalists. Of that additional spending, $950 is done with debit cards and less than $50 with credit cards.



Twenty percent of households use credit and debit cards interchangeably. This group is comprised of consumers who spend at the limits of their budget. While they spend more than the other two groups, they have the lowest income.



Of those who make purchases almost exclusively with credit cards, 60% say they do so because of points, rewards, or airline-miles programs. Consumers who prefer to use debit cards and those who use both types of cards interchangeably say they use debit cards to avoid going into debt.



The above data is based on March 2004 collection and comes from Forrester Research's Ultimate Consumer Panel, a single-source panel that electronically captures an array of offline and online behavior, including credit card and bank transactions and monthly statements, from a sample of 10,000 US households.



The trend to debit cards would seem to reflect a growing concern on the part of consumers about debt. However, the fact that the those who use debt cards the most are still among the heaviest spenders, would seem to indicate fear of debt has not created major restraints on their spending. For retail businesses relying on card purchases for the bulk of their sales, understanding changing card usage is an important dynamic. For companies selling goods and services to those businesses, the trend toward debit cards is an opportunity in need of exploration.