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September 25, 2020

Debit cards set a record: higher transaction volumes than credit cards

By Mohamed Dabo

In its continuing cycle of firsts and unprecedented events, the Covid-19 global crisis has scored another record in the US card market: debit cards have surpassed credit cards in transaction volumes.

Debit cards are experiencing a time of unprecedented transaction growth in the United States. For the first time, cardholders have spent more with their debit cards than their credit cards.

Mastercard and Visa debit card transactions and dollar volumes are greater than those conducted on credit cards, according to a new report from global research firm Research and Markets: Debit Card Abruptly Finds Itself Top of Wallet.

As consumers stare down potentially months of necessary household spending restrictions, they are relying on their debit cards much more, putting issuers in a new operating environment.

Highlights of the report include:

  • Review of Mastercard and Visa debit and credit data for the U.S., that finds purchase volumes in total were down 7% in Q2 2020 over Q2 2019. The decline was attributable solely to the 21.2% decline in credit purchase volume, compared with debit’s 8.6% increase.
  • Analysis of data compiled over the last several years showing that debit card and credit card growth often reflect opposite trends. Recent data reveal a very stark reaction to the two primary card products. In just the space of two quarters (Q4 2019 to Q2 2020), debit cards went from a 46.4% share of purchase volume to 55.3% share.
  • Survey data finds the use of a single preferred payment method has been increasing since 2018, with cardholders concentrating their payment loyalty to either credit or debit and a declining number choosing to use multiple payment options.
  • Activities that debit issuers will want to consider holding on to loyal debit card users for the long term.

The UK sees a similar trend

Data from industry trade body UK Finance data reveal that the value of credit card transactions in April dropped to £8.7bn, half the value compared to April 2019.

In the first full month of social distancing measures the number of credit card transactions by UK cardholders also witnessed a sharp fall of 45.9% to 163m, the lowest level in over nine years, as borrowers cut down on credit card spending in the face of the coronavirus pandemic.

In comparison, expenditure on debit cards remained robust.

While the number of debit card transactions in April 2020 was 5.1% lower than the previous year, the total value of these transactions rose by 0.9% to £51.8bn.

“This suggests some consumers may be acting more cautiously amid the current economic uncertainty and choosing to spend on their debit rather than credit cards,” said UK Finance.

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