Credit Card Review Blog

Debit Cards Are Back

Debit Cards Are Back

Using a check to pay for all of your purchases is kind of ancient. Using a debit card is almost just as out-dated. Well, debit cards may just be making their big comeback.

There has been a wider use of debit cards in recent months. This has left banks and credit card companies scrambling. These institutions are losing money because credit cards are more profitable than debit cards. People can’t “charge” anything using a debit card. Spending tends to get more out of hand with the use of a credit card.

Over 40 percent of American households carry a balance on their credit card. Carrying a balance usually means that they’ve spent more than they make or more than they can pay off immediately. Debit cards prevent this from happening. Debit cards limit what the consumer can do with plastic.

More and more consumers are moving into the mentality that debit cards are more beneficial than credit cards with the economy the way it is. Debit cards allow them to spend just what they need instead of over-spending.

Some consumers are using debit cards to help them budget their finances wisely and as a tool that can limit spending. Other consumers are using debit cards completely out of necessity. These consumers can’t get approved for a credit card with the banks’ recent credit crunch.

Experts expect that debit purchases will reach $1.2 trillion in 2008. This would be an increase of 13 percent. Credit card transactions are expected to rise only 3 percent ($1.9 trillion). Visa is feeling the effects of the recent shift in spending. Visa’s debit spending is expected to surpass its credit spending this coming year.

For the banks, there are both positives and negatives about the shift. On the one hand, banks won’t be threatened by the use of debit cards the way they are with the use of credit cards. As borrowers fall behind on payments, banks are losing money, and losing it fast. However, debit cards are not as profitable as credit cards because there is no interest associated with them.

How will you embrace the new credit card to debit card shift?