Jul 13 2010

Debit or Credit: Either, Both, Neither, or How Much?


The new payment mix is more about market share than about which payment dominates or will dominate. Credit unions care deeply about whether consumers use debit and credit cards. Cards tie consumers to their financial institution and are among the few revenue centers credit unions can influence.

In addition to the findings that cash is still essential and check usage is slowly shrinking, this focus on debit and credit usage shows that:

  • Debit cards have been used by over half of U.S. households for barely a decade, and there is no evidence that a peak in debit usage is imminent—although changes to interchange rules could affect those trends.
  • Intensive credit card users have both higher incomes and higher debt levels than those with neither card and those with only debit cards. They also have higher household net worth and a higher net worth to income ratio.
  • Intensive debit card users are generally younger. Debit-only users decrease by age, from 29% of 18–29-year-olds to just 7% of those over 70. Conversely, credit-only users increase by age, from 29% of 18–29-year-olds to 49% of those over 70.
  • The fraction of households using electronic billing, like many other recent technologies outside the payment arena, has grown much faster than those for earlier technological innovations.

Rather than predicting the imminent demise of this or that payment method, though, this research encourages credit unions to recognize that a complex mix of payments—each attuned to the context and convenience of the purchase—is here to stay.

Ben Rogers
Managing Director, Research
Report Number 216