Credit Card Use on the Rise



By Gary Wartik, with data from Bloomberg Press

During 2012, the use of bank debit cards used for purchases decreased for the first time in twenty years, according to an industry newsletter. The industry reports that 52.82 percent of non-cash spending in 2012 occurred on credit cards, while 47 percent involved credit card use. The figures reflect a change in position of about a quarter percent. The 2013 data will be available in the fall of 2014.

The expansion of the debit card market during the last twenty years reflects the fact that more customers are using more bank-issued cards of all types, and checks and cash less. The difference between the debit cards, of course is that its use is limited to what the user has available in his or her checking or other bank account. Credit cards, on the other hand may be used until a specified credit limit is reached.

Vision Economics has always encouraged clients to use credit cards prudently. Credit cards offer the advantage of the ability to pay off obligations over time and to have certain protections against fraudulent use that are not offered by debit cards. However, debit cards take funds for each purchase out of the checking or savings account as soon as the purchase is made, thus eliminating the opportunity to spread payments out over time. If one has had a spending problem, debit cards offer the advantage that they do not contribute to the build-up of debt.

For those who have not used credit cards carefully, and have thereby run up too much debt, there is a certain discipline that occurs when switching from credit cards to debit cards. That can be a good option, along with using cash and checks to control spending.

The trend towards greater credit card use suggests, according to credit card industry studies, that credit card use will be involved in nearly 55 percent of all non-cash sales by 2017, with debit card use declining to 45 percent. One change that consumers may see from their banks is a push away from debit cards, where service fees are limited by federal law, and to credit cards where fees are higher and interest rates on unpaid balances can range up to at least 29.9 percent.

All in all, credit cards and debit cards offer convenience and they are generally safer to use than carry large amounts of cash to make purchases, especially during holiday periods. The key is to use the credit cards wisely. If problems arise with respect to too much debt, Vision Economics has programs available, in concert with the credit card companies, to deal with debt issues.

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