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As Debit Cards Catch Credit, Banks Cash In

Consumers see way to limit spending; banks adjust fee tactics

By Michael Roston, Newser User

Posted Oct 30, 2008 2:10 PM CDT

(Newser) – Credit is no longer the king of cards, Business Week reports. As banks get stingy with credit and consumers look for ways to reel in their "charge it" ways, more and more are turning to debit cards—so many, in fact, that Visa projects debit spending could exceed credit this year. This year's 13% climb in debit purchases may seem like good news for banks, as debit cards users have no payments to default on, but they don't rack up interest, either.

Banks are already adapting to the shift: Instead of cutting off consumers who spend more than they have in their checking account, banks sock debit users with higher and quicker overdraft fees. But changes like these are beginning to chip away at the simplicity debit cards once offered. "As with credit cards, consumers can't keep up with what the rules are," said one financial services director.

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Debit card use has been catching up to credit cards for years, but only recently amid a weak economy has debit become the big U.S. revenue driver for card processors. (AP Photo/Bill Sikes, file)

Debit card use is growing in the United States at a faster rate than credit cards. (AP Photo/Paul Sakuma)

Debit card use has been catching up to credit cards for years, but only recently amid a weak economy has debit become the big U.S. revenue driver for card processors. (AP Photo/Paul Sakuma, file)

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Debit is becoming the payment card of choice
for the American public.
- Red Gillen of consultancy Celent.

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As Debit Cards Catch Credit, Banks Cash In