Study Finds Debit Card Usage is Declining

Once upon a time, debit cards seemed like a revelation and helped usher out the time-consuming process of writing a check. Pitched as a smarter choice to credit cards but with many of the same conveniences, 74% of households reported using debit cards in 2013. However, according to a new study by ValuePenguin, that figure has declined sharply over the past five years.

The latest numbers from ValuePenguin show that now only 58% of consumers say they use debit cards. Moreover, usage is some states has declined more rapidly than in other. As CNBC reports, the biggest decline was seen in Connecticut where debit card usage rates have fallen by nearly 30%. Similar results were found in New Jersey, Hawaii, New York, California, and Massachusetts, which all saw usage decline by more than 25%. Meanwhile only around 4% of households in North Dakota have ditched debit cards in the past five years. In South Carolina, South Dakota, and Texas things weren’t much worse as usage only dipped by around 10% or less in each.

Declining use of debit cards has come in tandem with rising usage for credit cards. In fact, over the past five years, use of credit cards has grown by 31.78%. As a result the number of households utilizing credit cards actually overtook those with debit cards circa 2017.

With the average credit score steadily rising in recent years, the lure of rewards credit cards could be a possible factor behind the switch. Additionally credit cards have traditionally offered greater purchase protection than debit cards, leading many financial experts to recommend consumers use them for online purchases and elsewhere. That said, debit cards do offer their own set of perks, such as the ability to request cash back when making a purchase and obtain cash from an ATM. In such cases, credit card users might be subjected to cash advance fees for these activities.

Speaking of ATMs, the advent of online and mobile banking options have also played a role in the decline of debit cards. While it may have once been necessary for banking customers to bring their debit card to a teller (or automated teller machine) to deposit checks or transfer money, most banks now allow check deposit via smartphone photo. Finally P2P payment services like Venmo, Apple Pay Cash, and Square Cash are giving consumers even more payment options beyond cash and debit cards.

Despite the sizeable fall debit cards have taken since 2013, it may be a long time before they’re replaced entirely. Although it seems more households have gotten on-board with the benefits of credit cards in recent years, there will surely be some who fear that merely having a credit card will lead them to incur debt. Then again, with mobile payments and other FinTech solutions also gaining tractions, it will certainly be interesting to see what role debit cards end up playing in our daily lives another five years from now.


Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded in 2015 to focus on personal finance and the emerging FinTech markets.

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