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California Debt Blog: Consumers Choosing Debit Over Credit

September 13, 2010 by Jonathan Stein

In today’s uncertain economy, increasing numbers of consumers are choosing to use cash or debit cards, which immediately deduct money from a checking or savings account, over credit cards. In fact, in 2009 more consumers used debit cards than credit cards. In 2007, 87 percent of consumers used a credit card in any given month. In 2009, only 56 percent of consumers used a credit card in a month. Credit card usage could fall to 45 percent in 2010.

Twenty-somethings are behind the trend, viewing debit cards as an easier way to budget. In addition, many low-income employees are having their salaries deposited onto reloadable pre-paid cards instead of receiving a check and depositing it into a checking account.

Credit card companies are struggling to maintain their levels of profitability, as more consumers are spending less and paying off credit card balances. Credit card balances at the nation’s six largest lenders have dropped by 20 percent since their peak in 2008, to $544 billion, which not only reflects consumers’ reluctance to obtain and maintain credit card debt, but also an increased effort by credit card companies to get rid of risky borrowers.  

Credit card companies have been introducing new products in an effort to maintain profitable. MasterCard will soon be introducing a program that will allow its users to set spending controls and receive alerts about the card balance.

Categories: Credit, Current Affairs Tags: Credit, credit card, credit card companies, credit card profitability, debit, debit card

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